It only has the appearance of strategic thinking. But it's not really a strategy. A strategy involves some choice , some decision.
You should assess each property investment on its merits. Does the return on the net investment (property value - mortgage) justify keeping it?
That is something each landlord should do for every property , every few years.
For example, if it turns out that Property 2 is not a good investment, then you should sell it.
Having sold it, the strategic question is : Should I use the proceeds to repay the mortgage on Property 3? If it's a cheap tracker, probably not. If it's not a tracker, probably yes. A rate of 4.5% is still a net rate of 3% after tax.
Another strategic question you should be asking is : Is it wise to have most of your assets in retirement in one asset class? The answer is probably not. You probably own a fourth property, your own home. It would make sense to diversify into the stock market.
So even if all your properties are still justified on an investment basis, then you probably should still sell one of them. Either repay the mortgages with the proceeds or invest in equities.
Are property investors happy to keep some debt?
The other big issue is tax. Once mortgage interest no longer due the profit must become significant and therefore the tax?
People can make very distorted decisions due to tax.
If you have a cheap tracker, it's probably better not to pay it off. If not, it's probably right to.
I had this discussion with a commercial landlord recently. He has a cheap tracker with 5 years to go. He wanted to switch to another lender and extend the mortgage to 10 years. "The more interest I pay, the less tax I pay."
He probably would have described that as "strategic". Stupid, but strategic.
Brendan