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Payoff Mortgages Early? by Jason on March 21, 2019 @04:06

                              
I'm 35 and want to retire at 55. I currently own 3 rental properties.

Property A: $644.14/month (mortgage, insurance & taxes)
4.375% fixed
Purchased January 2018
NO PMI
I'll be 64-years-old when the property is paid off.

Property B: $728.43/month (mortgage, insurance & taxes)
3.750% fixed
Purchased November 2017
NO PMI
I'll be 63-years-old when the property is paid off.

Property C: $708.00/month (mortgage, insurance & taxes)
2.70% fixed
Purchased January 2013
PMI until principal reaches 78%
I'll be 59-years-old when the property is paid off.

Questions:
1. Should I pay extra principal or save up and possibly purchase another property?

2. Should I primarily focus putting extra principal payments into Property C since I'm currently paying PMI? The interest rate is only 2.70%.


I know there are a lot of variables in this situation, but any advice or tips would be greatly appreciated. Thank you in advance.

-Jason
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Re: Payoff Mortgages Early? by Garry on March 21, 2019 @15:14 [ Reply ]
Your retirement goal of 55 is VERY aggressive. You should change it to at least 62, so you can figure on getting Social Security also when you retire, even though even that amount will only be 70% of what you would get at age 67 or 68.

Right now, you have the LOWEST interest rates any investor could possibly have anywhere in the country. Here's my suggestions : I like paying "round" amounts on all my mortgages. If you have an extra $100-$150 each month to go towards principals, on prop A, pay exactly $700 each month ($55 extra), prop B-$750 or $775 ($22-$47 extra ), Prop C- $750 ($42 extra)/mo.

If you can do that, you will be paying down the principal on all 3 props each month, without hurting your own personal income very much. You have TIME on your side, which is why I'm suggesting doing it this way. Also, on prop C, the mortgage comp. will not automatically take off the PMI at any certain point in time or amount. You will have to ask them to do an updated appraisal (at your expense, say 5 years from now), and if your mort. amount at that time, is 78% or less of that appraisal amount, then you can ask them to take off the PMI. (remember, your principal will have to go down, as your properties are appreciating in value, to hit that magic 78% amount.)

Keep saving as much as you can/want, once you make your enlarged mort. payments each month. Re-assess all your numbers once a year. Good Luck
Re: Payoff Mortgages Early? by lpadave on March 22, 2019 @13:39 [ Reply ]
jason
you're off to a great start.
its very hard to start out with positive cash flows. Usually for the first couple of years till the rents work upward most of us with mortgages are negative and depend on the tax benefits to help it make sense. Your mortgage rates are great.

Work on screening prospective tenants VERY CAREFULLY and try to avoid just putting a warm body in,...out of desperation or frustration. -- IT WILL PROVE TO MAKE YOUR LIFE EASIER AND MORE PROFITABLE. Its hard when a month or months pass with a vacancy(ies). build up some cash reserves to carry you thru those times.

take proper care of your properties AND your tenants,...they are your customers and they deserve proper value AND service for their money.

REMBER the '4 r's' ----RAISE RENTS REASONABLY REGULARLY.

resist the urge to grow too fast. don't get over leveraged and top heavy.

get a good cpa that knows RE and find out who the good lawyers are who know RE --- both transactional and LL / T law.

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