Saturday, January 26, 2013

It has begun...


My Pay Off My Rentals Wall Chart (The back of my 2012 desk calendar)
We're off and running!  We were able to take a special distribution from our Commercial Janitorial Business this month for $9,666.00, and as a result we've applied $9,000.00 of that to the lowest balance of our three rental houses.  The mortgage balance before that special payment was $49,123.  After applying this payment, the current balance is now $40,123.  In one fell swoop, the balance was cut down by 18.3%! 

What an invigorating and unexpected start to the new Pay Off My Rentals program.  The total balance of all rental property mortgaged has dropped to $168,650 from $177,650.

The bank did attempt to apply the additional principal payment to my regular February mortgage payment crediting a portion to interest and escrow.  However a quick phone call to customer service resolved the issue and the entire portion has been properly applied to the principal.  When making extra payments always be sure to verify that it was properly credited.  Usually a memo line or even an accompanying letter will suffice, but in this case I used my banks free online BillPay service and overlooked the memo line.

I doubt we'll be able to make too many large, one-time extra payments like this going forward.  The current combined monthly mortgage payments are $1,865.50.  We then add an additional $3,400 monthly principal payment.  Of course, the tenants take care of the first $1,865.50, but we're responsible for scraping together the $3,400 payment to principal each month.  We've certainly challenged ourselves here, and while there's no guarantee we'll be consistently successful going forward, it sure feels good to see the balance drop by such a significant percentage so soon.  I feel like a thoroughbred racehorse who got the jump coming out of the gate, but how will we fare until the finish line in 42 months???

I plan on updating the blog monthly following each mortgage payment along with the adventures that each respective month brings--for better or worse. 


The Executioner said...

Smart move. I assume you'll use any additional monies in the future to attack the lowest balance first, right?

Once the first of the three mortgages is gone, you'll have the benefit of the free cash flow to really plow down the next two.

Nice start to 2013!

Pay off my rentals said...

Right on! That's the plan. The additional free cash flow is targeted toward the payoff. A "snowball" payoff approach, if you will. It's that type of compounding that's factored in to getting the three mortgages eliminated in 42 months. Thanks for the observations!