Wednesday, October 2, 2013

Update - October 2013

October is here and a whisper of Autumn is in the air.  In my part of the world you tolerate Summer to get to Fall and Winter to get to Spring.  The weather is rarely boring, or, as they are fond of saying here:  "If you don't like the weather, wait ten minutes and it'll change".  Truer words were never spoken.
Something else that's changing is my percentage of ownership (or "Equity") of my rental real estate portfolio.  At the rate we're moving along I am three months away from owning House #3 free and clear!  Three more payments and it will be mine I tell you, MINE!  BWAAAHAAAHAAA!!!!!  I apologize for that moment of insanity.  That's just shy of $50,000.00 in one year.  Don't think I haven't been tempted to stray from my course...I have.  But we're so close now that it would be foolish to not see this through.  We will reap the reward of an additional $424.57 or $5,094.84 annual cash flow.  That's 10.4% cash on cash return on that $49,123.00 going forward.
I am thinking of adjusting the strategy beginning January, 2014, however.  While having one less monthly mortgage payment in itself amounts to an additional layer of security, I am considering lowering the additional monthly principle payments from the $3,400 range to more like $1,800 to $2,000 and banking the remainder in savings to serve as yet another layer of security going forward.  Then, when I can pay the balance of the mortgage off with the savings, I will write one check and be done with it.  This will slow the payoff process a bit because those large payments really shrink the amount of interest each month.  But it's a trade off I'm willing to consider for the safety it provides.

Here are the numbers for October:
Jan 1, 2013 (Beginning Bal)                 October, 2013                          Amount Paid  =======================================================================
House #1 - $70,908                                  House #1 - $68,078                    $ 2,830
House #2 - $57,619                                  House #2 - $55,044                    $ 2,575
House #3 - $49,123                                  House #3 - $10,470                    $38,653
-----------------------------                             ----------------------------                 ---------------------------
Total:        $177,650                                 Total: $133,592                          $44,058 (-24.80%)
My total equity for those three rental properties has increased by 25% (rounding up) just since January of this year.  It will be so exciting to pay off that property and have only TWO monthly mortgage payments totalling  $1,317.39 (Payment, Interest, Taxes & Insurance)!  I can hardly wait.

Whatever the case, rest assured, we'll keep you abreast of the situation.


John haver said...

You are doing great. It seems like you have decided to pay off your house#3 than others. Is their any especial reason to do so?

Pay off my rentals said...

Hi, John.

Thanks for visiting and commenting. I'm basically using the snowball method of paying off the rentals. House #3 was the lowest starting mortgage balance and so it by default became the starting point.

Also, by using this method and paying off the lowest mortgage balance first, we more quickly realize the benefits of the principle and interest portion of the mortgage becoming cash flow more quickly this speeding up the payoff process.

Stop by anytime.

Steve MoneyPlanSOS Stewart said...

Wow! That's so cool! I love your idea of paying off the lowest balance rental first. I can only imagine the feeling you will have once the rental check comes with no mortgage payment to apply it to.

I doubt it will take you long to buffer up the savings to knock out the next one. That should feel awesome too!

Great job! Keep going! Don't quit when things get tough!

Pay off my rentals said...

Thank you, Steve, for your encouragement. It certainly does take determination to stay the course month after month, and soon to be year after year. But as you've alluded to, you have to keep the prize fixed in your mind, i.e. getting to keep the payment and interest portion of each monthly rental check. I'm just a couple of months from experiencing that...again. Thanks for stoppng in. I'll visit your blog next.