Tuesday, November 5, 2013

Update - November 2013

"The journey of a thousand miles begins with a single step" 

--Chinese philosopher Laozi (c 604 bc - c 531 bc)
While many have quoted the above proverb searching for inspiration to begin a long and arduous journey, I would venture to say that the Chinese philosopher Laozi probably never had the long road of debt reduction to travel.  And what a long road it can be month after month, year after year...
However, once we've mustered the courage to begin, I believe most of us need continuing inspiration along the journey.  That encouragement to continue can be found in the form of smaller successes along the way.  For example, I started blogging about my rental real estate payoff journey in January of this year.  All is going well as I am now nearly crossing a smaller, intermediate goal line of paying off the first of three remaining rental houses. (More on that to come.)
Really, however, my payoff journey started in earnest just over three years ago in July, 2010 when my mortgage debt totalled $255,025 (including my personal residence).  Although we had just bought our freshly remodeled 900 square foot, 2 bedroom/1bath home for $74,500 (Yes, houses are cheaper in this part of the country.)  putting 20% down and financing the remaining $59,600 for the next thirty years, I really, really wanted to get our personal residence paid off quickly.  So, we took the first step of a 59,600 dollar journey and 19 months later, we owned our house free and clear!  </begin rant>I don't care what the mathematicians say.  I couldn't give a hoot about the lost investment profits that could've been.  We own our house!  It feels great!  It feels secure!  It was worth the effort.  Don't ever let anyone tell you differently.  Of the hundreds of blog comments I've read over the past several years on paying off one's home, I've never read about anyone regretting, I mean truly regretting paying off their home because they left some potential investment profits on the table in the process.</end rant>
That early success is being built upon with this new soon-to-be success:  Another paid off house.  More than that, the $255,025 debt we owed in 2010 is now nearly half that original amount: $129,495.  Even better is the fact that this payoff will yield returns in the form of free-cash-flow...$425.00 p/month of it.  Put another way: If I were to create an investment portfolio of dividend-paying stocks paying an average of 4% annually, or $425.00 p/month, it would require a portfolio valued at roughly $127,500.  Those "dividends" in the form of no more mortgage and interest payments will begin to accrue in January.  I can't wait.  The journey has been a little rigorous, but we are well along.
Jan 1, 2013 (Beginning Bal)                           November, 2013                      Amount Paid =======================================================================
House #1 - $70,908                                         House #1 - $67,758                          $ 3,150
House #2 - $57,619                                         House #2 - $54,752                          $ 2,867
House #3 - $49,123                                         House #3 - $  6,985                         $42,138
-----------------------------                                     ----------------------------                   ---------------------------
Total:       $177,650                                               Total: $129,495                        $48,155 (-27.10%)
Soon, this will mean that our home plus four of our six rental houses will be paid off.  Five down, two to go.  Is that light a horizon we're beginning to see as we approach the end of a long, long journey of 255,025 dollars?