Accomplishment and Celebration

Two years later and two houses paid off!
The converging lines are the third rental and the total debt of the three together.
They now have become one and the same.

It has been accomplished.  Another one bites the dust.

Two years and two rental houses paid off.  That's what a plan, determination and time can achieve when these three ingredients come together.  Take away any one of those three basic ingredients and the debt reduction effort will either be at best, severely hampered, or, at worst, fail.

When I laid out this plan two years ago, it was a lofty one:  In true snowball fashion, the plan was to add $3,400 to my monthly mortgage payments (nearly every spare cent we had available) and pay off three rental houses in in 42 months.  The plan was carefully and thoughtfully laid out.  I had run the numbers using payoff calculators and had squeezed our household budget to make room for the fat monthly payments that would be required month after month, year after year to reach the goal.  Now, the second ingredient--Die-hard determination over a period of time--was necessary.  You well know that everyone starts off determined to achieve their goals, but maintaining that determination over a long period of time is where the rubber meets the pavement.  Debt reduction is a lot like running a marathon:  The starting gun sees 100% success rate while the finish line awaits those who were truly determined to finish even if they must cross that finish line limping and puking their guts out. 

Jan 1, 2013 (Beginning Bal)                             December, 2014              Amount Paid Off

==========================================================================

House #1 - $70,908                                         House #1 - $63,163                      $  7,745
House #2 - $57,619                                         House #2 - $ 0                              $57,619
House #3 - $49,123                                         House #3 - $ 0                              $49,123
-----------------------------                                    -----------------------------               -----------------------------

Total:       $177,650                                                          $63,163                   $114,487 (-64.44%)


As for the third and final ingredient (time), well as you can see from the chart above, in twenty four months we have paid off two houses totaling $114,487 of mortgage debt.  That's an average of $4,770 per month!  The snowball kept getting larger and larger.  That's the way it works.  What a fun way to play in the snow ;-)

Of course, our determination was tested all along the way.  There were several adjustments and a fair amount of second-guessing.  Like most, we had months when life got in the way and the additional payments had to be temporarily placed on hold; Not the least of which was a loved one getting diagnosed with Cancer (all is well and in full remission), shoulder surgeries (as in three of them), and then trying to balance out this austere plan with some reasonable enjoyment of life (Our trip to London, Ireland and other vacations).  On the flipside, however, there were those wonderful months when unexpected bonuses were applied in large amounts toward the debt.  It was absolutely thrilling to see balances precipitously drop resulting in interest monies saved.  For example, when possible, we would add any windfalls like bonus distributions or extra monies earned to pay off the balances even more quickly.  On two occasions we were able to make 15k payments.  On one occasion, 10k. and several other 6k to 8k payments on three other occasions.  These massive additional payments really grew the snowball and became encouraging, tangible evidence that we could reach our goals.  In the end, however, it was time that did its job and here we are two years later with two of the three houses completely paid off and the additional available passive income from those rentals just adds more snow to our massive snowball. We now have nearly $1,000.00 per month of additional income that now no longer goes to the bank.  It comes to us like a sweet dividend every month.

Speaking of dividends... A change in direction

As of January 1st. we are changing direction.  Our company is building a new office and it will include a couple of apartments where the owners can live.  This build out is being financed by the company and it means that we will be selling our modest 900 sq. ft. two bedroom house this Spring. 

Then what?  We can use the proceeds from the sale of our house to pay off the remaining rental house in full.  As a result, we finally get to do something we've really, really been wanting to do for years:  Create a Dividend Growth portfolio as an additional passive income stream.  I've mentioned my love for dividend stocks here on several occasions over the past two years, but I was determined to stay the course toward complete, absolute and unequivocal debt-free living by paying off the three remaining mortgages and converting them into income streams.  The payoff of that final mortgage will also mean an additional $553.88 in monthly income and the complete realization of our stated goal:  Pay off $177,650 in mortgage debt and add $1,476.46 to our monthly passive income stream.  The additional $1,476.46 of capital along with the monies we've been directing toward the mortgages can now be redirected toward building our dividend growth equities portfolio.  How cool is that?  Compounding at it's best as our little investment dollars work full-time to make more little investment dollars.  Now that's worthy of a celebration!

If you've ever needed convincing about the merits and superiority of DGI (Dividend Growth Investing) vs. the 4% rule, here are a couple of articles for you to read.  I think it's well worth your time and they convinced me that DGI blows the sacred "4% withdrawal rate" out of the water:

http://seekingalpha.com/article/290289-retirements-4-percent-rule-why-mr-and-mrs-income-dont-need-it-part-1

http://seekingalpha.com/article/290294-retirements-4-percent-rule-why-mr-and-mrs-income-dont-need-it-part-2

If you've been regularly reading this blog or are here for the first time, I hope it proves as encouraging for you to read as it has been for me to post my ups and downs of real-life debt pay down.  Since there are a million bloggers telling the world about their dividend portfolio efforts, I don't have any inclination to blog about my efforts going forward.  It's been interesting and fun.  I've never run any adds on this blog or tried to sell anyone anything.  The true motive behind this Pay off my rentals blog has always been to help keep myself accountable while encouraging others along the way.  I sincerely hope the latter has been as successful as the former.  My intention is to keep it online and accessible as it costs me nothing.  I'll even check in from time to time to address any comments you may leave.

Best wishes to all of you working hard to pay off debt and build a passive income stream(s).

Update - October/November, 2014

October/November is synonymous with falling leaves, but in our case, October/November is just another couple of months of falling debt totals for our rental houses.  We are down to the last two months of paying off House #2 which now sports a balance of exactly $10,000.  The goal, as it stands now, is to make two payments of $5,000.00 (one at the beginning of December and one at the end of December) and have it paid off by December 31st.  How will we come up with ten grand to achieve this?  Just a little bit of financial maneuvering.  Our distributions from our company usually hit my bank account a couple of days early every month.  So, we will simply apply our January 1st mortgage payoff amount to the very end of December and voila! House #2 mortgage will be history.  That will make for a very happy beginning to 2015, don't you think?

Jan 1, 2013 (Beginning Bal)                  October/November, 2014     Amount Paid Off

==========================================================================

House #1 - $70,908                                         House #1 - $63,833                     $  7,075
House #2 - $57,619                                         House #2 - $10,000                     $47,619
House #3 - $49,123                                         House #3 - $ 0                             $49,123
-----------------------------                                    -----------------------------               -----------------------------

Total:       $177,650                                                            $73,833                   $103,817 (-58.44%)

We have surpassed the 100K mark on the relentless march toward complete and total payoff of these rental houses!  At this point the income from the rental houses is really adding wind at our back. As planned, that income is supplementing our payoff efforts in a very meaningful way.  Once the second house is paid off, we will have yet more income to apply to the payoff of house #3. 

When this odyssey started in January of last year, a $177,650 balance seemed so huge and overwhelming.  All I knew at that time was that I had a deep desire and strong yearning to be 100%debt free within 42 months.  It wasn't enough to be just "consumer debt free".  No.  I wanted to be totally, absolutely and unequivocally debt free.  Now while being debt free--excluding the mortgage-- is certainly a laudable achievement, having no mortgage debt in addition to no consumer debt has got to be the ultimate in financial peace.  Add to that the passive income that the rental real estate brings in each month whether I decide to get outta bed or not (kidding...I always get out of bed), and you've got a wonderful recipe for financial independence.

The other thing I knew back in January of 2013 was that if I stayed focused and stuck to the plan, time would take care of the rest.  And it is.  I mean really, think of how time marches on in our lives.  For example, if you're the kind of person that makes new year's resolutions, January 1st, 2014 was eleven months ago.  Nearly a year has passed by.  If you set a goal and formulated a plan, you'd be ELEVEN full months into its execution by now.  Yet, January of this year seems like just yesterday, doesn't it???  So, ask yourself, "Where do I want to be this time next year?"  Where can you be two years, three years, five years from now if you plot a steady course toward debt payoff?  You'll certainly be somewhere because time marches on.  It's an inevitable reality that we can use to our benefit...or detriment.  Before you know it you'll look back and either say to yourself:  "I wish I would've [insert desired goal].... or, "I did it!"  The choice is always ours.  But success stories are being written everyday by people who stop talking and just start doing.  So just do it!

JUST DO IT!

Blog about it.  Post a payoff chart like I did and chart your progress.  Go to the online blogs and shout it out.  They can be a tremendous source of ongoing encouragement because you'll quickly find yourself in the company of like-minded individuals who's successes and failures will keep you encouraged along the way.  In the meantime, see yourself enjoying the pleasure and personal fulfillment of your goal.  See it, feel it.  Use the power of imagination to impel yourself forward toward realizing your goals--be they financial or otherwise.

As for us, next stop...Jan 1st and a celebration of paying off house #2

Update - September 2014

London was brilliant!  That, along with "lovely", were expressions we heard often.  Indeed, London is a culturally diverse city rich in history.  The buildings have so much character that you could spend all your time just admiring the architecture and facades of yesteryear.  My wife and I thought it was a "lovely" place and we would go back in an instant. 

Westminster Palace and The Tower of Big Ben - England

Ireland was also an extremely marvelous country and the cliffs of Moher ("Cliffs of Insanity" as they were referred to in the movie "Princess Bride") were incredible.  Castles dot the landscapes and buildings hundreds of years old are still infants by their standards.  If only my rental houses could last so long...

Cliffs of Moher - Ireland

Cost of 12 day trip (Airfare, Hotels, Taxi. Spending money): ~$7,500.00  

Airfare was paid some months back and I just sent off a payment for the credit card for the remaining purchases.  No carry-over debt from this trip!  It was cash-flowed and that made it even sweeter.  

The people were very kind and we fell in love with everyone.  We can now add Europe to our list of places visited.  To date we've spent time in England, Ireland, Mexico, Guatemala, Nicaragua, Costa Rica, Panama, Colombia and the Dominican Republic.  What tremendous human diversity exists between those places. We wouldn't trade them for anything.  Next stop...Italy.  But that's another story.

SEPTEMBER UPDATE:

Jan 1, 2013 (Beginning Bal)                           September, 2014                       Amount Paid Off

=======================================================================

House #1 - $70,908                                         House #1 - $64,498                     $  6,410
House #2 - $57,619                                         House #2 - $19,418                     $38,201
House #3 - $49,123                                         House #3 - $ 0                             $49,123
-----------------------------                                    -----------------------------               -----------------------------

Total:       $177,650                                                            $83,916                    $93,734 (-52.76%)

Obviously it would have been nice to have applied the $7,500 we spent on the European vacation toward the payoff of house #2, but this is when you have to balance the quality of life and the value of the experiences that mold us and our attitudes toward the world around us with frugality and debt paydown.  

NOTEWORTHY POINTS:

The interest portion of the mortgage payment for house #2 was a whopping $74.44.  Just nine months ago in January of this year the interest portion of each payment was $203.12.  That's the beauty of the debt-payoff-snowball in action.  Compounding in reverse.  It is the wind at your back, adding its efforts to your additional principle to create an even faster payoff.  

As it stands now, I am hoping to have House #2 paid off by next February.  We have other plans in the works that may help us get the last house paid off by Summer of next year.  I can't share those details with you yet, so stay tuned!

 

Update - August 2014

Another month bites the dust!

We are ahead of schedule.  The red line is a straightline progress showing approximately $3,400 per month added to the principle with the payoff goal of $177,650 in 42 months.  The blue line shows where we actually are...ahead of schedule by many thousands of dollars, $12,604 of them to be exact. 

We have essentially sunk every extra dollar available into this accelerated plan.  Bonus distributions, rental proceeds, saved income, all dollars given a purpose and sent out to accomplish their noble mission.

As a result of this laser-like focus and keen determination, the balances are shrinking quite nicely.  During the past three months we were able to accelerate the mortgage payoff by adding a total of $32,000 to our regular payments.  That's nearly $11,000 per month!  It was only January of last year that we owed $177,650.  Here we are just 20 months down the road with only $85,000 left to go.

Jan 1, 2013 (Beginning Bal)                           July, 2014                       Amount Paid Off

=======================================================================

House #1 - $70,908                                         House #1 - $64,829                     $  6,079
House #2 - $57,619                                         House #2 - $19,852                     $37,767
House #3 - $49,123                                         House #3 - $ 0                             $49,123
-----------------------------                                    -----------------------------               -----------------------------

Total:       $177,650                                                            $84,681                   $92,969 (-52.33%)

What helps us to stay the course?  Keeping the goal and its benefits clearly in mind.  For example, we keep anticipating how when house #2 is paid off, the real payoff comes.  How so?  The lack of that mortgage will mean an additional $498.01 in cash-flow each and every month.  What a sweet relief to know that the only mortgage we have left will be the last and final house #3 whose PITI payment is $710.38 per month.  Piece of cake!  

But something else that makes for sweet meditation is to think about how that additional $500 per month reward for our financial discipline is the equivalent of a dividend growth portfolio totaling $120,000 paying a 5% dividend.  Or, a portfolio totaling $150,000 paying a 4% dividend if you're slightly more conservative.  Moreover, that reward will have only cost us a few thousand dollars because we bought the house right to begin with and subsequently let the tenants pay for a chunk of the house.  Ultimately, we have only paid a few thousand dollars for an income-generating machine worth so much more. That's rental real estate done right.  

Obviously, we can't maintain that pace indefinitely.  In fact, for the next two months we'll probably pay the minimum as we are travelling to England and Ireland and want to cash flow the trip. No debt here!  We've already cash flowed the airline tickets, but we still have hotel and misc fees to pay.  So, come November the pace will return to a more normal speed with an anticipated payoff of house #2 by February or March at the latest which would actually put the payoff of house #2 right on schedule.

While achieving your goals, it's easy to give out.  Paying off debt or building a dividend producing portfolio can take years.  That's not a sprint, it's a marathon.  But while running that marathon, take time to picture yourself enjoying the rewards of your hard work and self-discipline.  Picture yourself crossing the finish line.  Feel the accomplishment.  See yourself with your minds-eye enjoying the additional cash-flow or or lack of stress-related debt.  See it.  Touch it.  Enjoy it.  Resist the temptation to dwell on how far you still have to go.  Look back on how far you've come, your achievements!  If you can maintain that powerfully motivating imagery and mental discipline, I can just about guarantee that you'll eventually achieve your worthwhile goals.

ALL debt is RISKY debt

It's time to dispel a myth once and for all. There is no such thing as "Good debt".  This will no doubt be a controversial post, but it has to be said... ALL debt is RISKY and therefore potentially bad!  There, I said it. I don't feel guilty saying it and I won't repent. It's all risky, risky, risky!

Whew! This coming from a guy who's successfully leveraged debt to buy multiple properties and build a rental real estate portfolio that will care for us well into our old age. Seems awfully hypocritical, doesn't it?  Perhaps. However, I like to think that this conclusion regarding debt is part of the evolution of personal finance education acquired through the years.

Oh, no! He's drunk the Dave Ramsey Kool-Aid. Well, as much as I agree with Dave Ramsey's position on several points, I'm my own man and do my own thinking. Like most, I take a little from here and a little from there and mix it together with my own values to arrive at a philosophy I can call my own. Now, on with five reasons that all debt is risky:

1) Debt = Risk

Unless you maintain the cash to be able to pay off the debts you acquire in an easily accessible bank account, you run the ever-constant risk of a health or economic crises that may cost you your job. Such unforeseeables can put your financial and emotional well-being at risk. Carrying debt is like playing Russian Roulette. There's a real chance (1 in 6 or 17%) that you could loose and be set back financially for many years--if you recover at all.  It is impossible to successfully argue otherwise. The odds are mathematically irrefutable.  Every day, month, year you carry more debt than you have cash to pay off, you're just spinning that revolver debt-cylinder and pulling the trigger hoping it's not the one containing the bullet!  I don't know about you, but I'm no fan of living under a cloud of risk every day of my life.

2) Debt is expensive

Let's assume that your one of the few who keep enough money stashed away in a safe place and can pay all your debts off in one fell swoop.  As a debtor you must still pay for the privilege of borrowing someone else's money.  That privilege can get very expensive.  I won't even bother with the most expensive interest like revolving charge accounts or credit cards.   Let's just take a common FHA mortgage to illustrate the point. 

For example: If you think you're only paying 4.5% for the $200,000 loan (after 20% down) you've mortgaged, think again.  Over the course of your thirty-year amortized mortgage, you are paying $364,809.54. The interest amounts to $164,809.54. That's expensive! But it get's worse...

If you put less than 20% down for an FHA loan (many typically put the minimum 3.5% down), you will pay for Mortgage Payment Insurance (MIP) amounting to an additional 1.75% up front but usually rolled into the mortgage and an additional MIP of 1.35% FOR THE LIFE OF THE LOAN. That loan is getting expensive.

How much rent are you paying each month to borrow someone else's money?  Wouldn't it be better to keep that money-rental-fee for yourself, stockpiled and stashed away for an inevitable opportunity?

3) Oh, but mortgage debt and school loans are "Good Debt", right?

Good Debt vs. Bad Debt is a misnomer.  It should more appropriately be termed "tolerable vs. intolerable debt".  Yes, your low-interest mortgage and student loan debt may include certain tangible benefits. But that doesn't make it "good debt". What's good about debt? Try telling a person diagnosed with Thyroid Cancer, "Oh, well, if you have to have cancer, that's one of the better ones to have". Oh, sure, they may nod in agreement and smile, but they're secretly wanting to slap you in your ignorant face.  There's nothing inherently good about any form of cancer. Let's call it like it is, a frightening, potentially life-threatening disease.  There's NOTHING GOOD about it! 

I'm not telling you that you should NEVER, under ANY circumstances get a mortgage, nor am I saying you should NEVER borrow money to get an education.  If you feel you must do either, then at least consider the less expensive options: (Like buying a house well below your means and getting an education that doesn't require an expensive out-of-state university with twenty years of student loan payments.

It's simply more tolerable than, say, high interest revolving credit card debt.  But not matter how "good" it appears, the entity who loaned you the money has a lien on your possession--which often serves as collateral--amounting to a lien on your life.  He owns a portion of you and you cannot easily extract yourself from his grasp without pain.   Nothing "good" about that.

You may escape the fate of those who've fallen due to unforeseen circumstances in their lives, but in the end you still played a dangerous game of Financial Russian Roulette.  You just never know in which chamber that fateful bullet lies.

4) Debt limits freedom

It's like a ball and chain attached to the ankle of a sprinter.  Your mobility in life is severely limited. Want to move yourself or the family to another area?  Change jobs? You MUST be able to find the right job which will pay the right amount of money to cover not just life's basic necessities, but also enough to service the debt load you've accumulated.  The greater that load, the heavier the ball, the stronger the chain and the more limited your life choices become.

5) Debt creates anxiety

Why worry about whether there's a slow-down at work or in the economy at large?  Why worry about who the next boss is going to be and whether he'll like you or not?  Or whether she's an absolute lunatic bent on making your life a perpetual panic-attack?  A lack of debt gives you the freedom to tell people you're just not going to put up with the crap! 

Let me illustrate: Just a few days ago we got a belligerent call from a client whom we've faithfully and conscientiously serviced for three years. In fact, the location went up for bid a few months ago and we were awarded a new three-year contract with a nice increase.  A new manager came in (the third in three years).  He was rude, unreasonable and threatened to cancel our contract if we didn't accommodate his every unreasonable demand. This is the kind of phone call that keeps many a business owner awake at night worrying.  Not us.

What did we do?  Since our company is debt-free, and our household is consumer debt free (House paid off, cars paid off, most rental real estate is paid off), I called him back and simply told him we were done with them and to get another company to service his facility. He was flabbergasted! Twice during that conversation he said in all his years he's never had a vendor quit him.  I doubt he's had many debt-free vendors during that time who simply didn't have to put up with his crap.  Obviously he's been accustomed to having vendors and employees kowtow to him and have no choice but to put up with what ever crap he decided to dish out.  Not us! I've fired several unreasonable, belligerent clients over the years.  Even though it was a lucrative contract, we just didn't have to put up with him. We fired our client and moved on.  Easy! Not for a minute did we stress over how we're going to make up for that lost client's income. Being debt-free gave us options...stress-free options.  How liberating is that?  Debt-free essentially equates to anxiety-free.

On the other hand, don't misunderstand me.  I'm not telling the whole world not to use debt responsibly.  It can be a powerful leveraging tool toward greater financial success. However, let's not call something so potentially destructive, good.  A knife can be useful and practical, but it's not without risks.  You could easily drop it and pin your foot to the ground with it, or cut your finger while chopping vegetables. Those risks are not good, they are at best, tolerable. Likewise, all debt carries risks, much of the time it is expensive, often limits personal freedom and tends to create anxiety.  Instead of trying to distinguish between good debt vs. bad debt, we should recognize it for what it is: Tolerable debt vs. intolerable debt.   At least we should fully understand and appreciate the risks of any debt, right?

WOW! What a Snowball!

Now that's a snowball!  Once that baby gets rolling downhill, it will take out just about anything in its path. And that's just what you need to take out massive amounts of debt:  A massive snowball getting ever larger, reaching critical mass, gathering momentum while destroying all debt in its path. 

Of course, my snowball didn't start off nearly this big.  When I started this debt-free journey with just a small snowball in hand last year, I knew I had a monster-sized challenge...Pay off $177,650 of mortgages in forty-two months.   How does one start?  I started plotting my attack by plugging numbers into amortization payoff calculators like these from The Mortgage Professor:

http://mtgprofessor.com/CalculatorArticles/Mortgage%20Payoff%20Calculators.html

It's really cool to see what an extra payment each year, or each month, or what an occasional one-time large payment (like a tax refund or bonus or money from selling something) can do to wiping out a mortgage over the long term.  Play with the calculators and see what I mean.  I was convinced that I could destroy these 30 year mortgages (now 15 year) in just a handful of years.  In fact, they convinced me that if I got really aggressive, I could wipe out my $177k of mortgages in less than four years. But how? 

Due to the wonderful combination of being both consumer debt free as well as having some additional cash now freed up from paying off our home in only nineteen months, I now had quite a bit more money available to begin increasing the size of my snowball.  My dollars had a noble purpose.  My cold, hard cash would now become a cold, hard, debt-destroying snowball!

In true snowball fashion I chose to pay off my mortgages from the lowest to the highest.  The first mortgage--at the time totaling $49,123--would free up about $425 per month that could be added to the snowball.  Twelve months later, mission accomplished!   (In the spirit of full disclosure, after paying off house #3, I did take a few months off and put the snowball in the freezer.  The payoff effort was intense and I just needed a personal break.)  By April I was refreshed and ready to move on to house #2.  That one was a little larger at just under $55,000 by the end of the year.  We are now into month number 19 of 42.  Where do we stand?

Jan 1, 2013 (Beginning Bal)                           July, 2014                       Amount Paid Off

=======================================================================

House #1 - $70,908                                         House #1 - $65,160                     $  5,748
House #2 - $57,619                                         House #2 - $25,692                     $31,927
House #3 - $49,123                                         House #3 - $ 0                             $49,123
-----------------------------                                        -----------------------------               -----------------------------

Total:       $177,650                                                            $90,852                    $86,798 (-48.85%)

I'm astonished at these numbers!  A few notable highlights:

• Nearly 50% of the mortgage debt has been eliminated in a mere nineteen months
• We are now solidly under the $100k mark for total mortgage debt.
• We may be able to eliminate the mortgage on house #2 by year's end.

When we accomplish the third bullet point and eliminate #2's mortgage, that will add another $498.01 to the snowball.  The only problem is that there may be some reduction on the personal income side as our company may loose a lucrative contract and the effects will melt the snowball a bit.  If that happens, I will accept that and adjust accordingly.  We've had a pretty good income this past year and a half and I'm thankful we didn't squander it.  After all, regardless of what happens to our snowball going forward, we are certainly better off having one or two less mortgages.  That's what it's all about:  Remove the risks associated with debt and enjoy the sweet feeling of increased personal financial safety and security.  Let the snowball continue! 

How's your debt payoff or investing snowball coming along?

My Rental Payoff History ---Update - June 2014

If you've read the last eighteen months of my Rental Mortgage Payoff blog posts, you'll often see that I speak of three mortgages (now two) that we are working hard to pay off.  The fact of the matter is that when we reach our goal of paying off the remaining mortgages, we will have paid off a whopping $360,000 of real estate which we purchased between April, 2004 and February, 2010.  In fact, we were on such a real estate investment tear that we bought 4 houses in a span of only five months back in 2004!  At that point in my life I really knew what I wanted to do when I grew up, and "Mr. Real Estate Investor" was my name.

Excluding a couple of other houses which we flipped for profits during that period, we were expecting to pay these puppies down over the next THIRTY YEARS.  At the time it seemed like a great plan.  Well, as is frequently the case in personal finance, times change and plans evolve. 

For example, a couple of years ago I decided that beginning with our personal residence we would eliminate ALL mortgage debt from our lives.  ALL OF IT.  We were already "debt free" when it came to consumer debt.  But as liberating as that can be, I don't view that as true freedom.  In my mind, even when one is Consumer Debt Free, the Mortgage debt is like a terrible aftertaste that lingers after you've spit out a mouthful of something rotten.   So, being consumer debt free wasn't good enough for me.  No, sir.  I decided to completely rinse away all lingering mortgage debt aftertaste and get a fresh start.  I wanted to be truly debt-free.  There was no so-called "good debt", it was all bad.  Thus, this blog was born.

Mortgage debt payoff history

We currently own a total of seven houses.  Six are single-family rentals and one is our personal residence.  They range anywhere from a 420 square foot studio house (which we paid cash to acquire) to a 1558 square foot 3 bed/2 bath home sitting on an acre of land.  The complete mortgage payoff history looks like this: (Arranged by order of payoff date)

HOUSE      DATE BOUGHT       AMNT PAID          DATE PAYOFF     LENGTH     BALANCE
---------------------------------------------------------------------------------------------------------------------------
Rental 6              7/2004                 $11,500               PAID CASH                 0                   0              
Rental 5              5/2005                 $44,000                     8/2007               2 yrs. 3 mos.     0
Rental 4              9/2004                 $30,400                     2/2012               7 yrs. 5 mos.     0
Rental 3              6/2004                 $56,000                   12/2013               9 yrs. 6 mos.     0  
Rental 2              4/2004                 $65,600                      -----                      -----           $39,654 
Rental 1              6/2005                 $77,000                      -----                      -----           $65,488
Residence          2/2010                 $74,700                     9/2011               1 yr. 7 mos.       0
=======================================================================
TOTALS:                                       $359,200                                                                 $105,142

As you can see, we've paid off $254,858 (or more than a quarter of a million dollars) of mortgage debt since 2004.  However, $72,508.00 of that debt has been paid off just in the last eighteen months alone!

When all is said and done in about two more years we will have paid off nearly $360,000 of real estate in approximately twelve years.  Of course, we can thank our tenants for helping is in this grand endeavor.  They have paid for a good chunk of that real estate.

What will we do after we finish this mortgage pay-off-a-thon?  I really don't know.  Like I said, personal finance plans and goals evolve.  The history of this blog is proof of that as I have wavered back and forth at times.  However, what I do know is that we will have more options to choose from.  For example, we could choose early retirement.  How cool would that be? Or, we could continue working and use the rental proceeds to buy more rentals--with cash, thank you very much!  Perhaps we'll choose to diversify our investment portfolio by putting together a dividend growth basket of companies to add to the passive income pool.  What a terribly wonderful position in which to find ourselves in a mere twenty-four months!

True, the nerd math will tell you we've done this all wrong.  We should've put all that money in the market and made ever more money.  NO! NO! NO!  This is better.  This removes the market risks and associated anxiety.  This is TRUE FREEDOM!  In retrospect, I don't regret one dollar spent on this debt elimination plan.  Not one dollar!  You can throw math at me all day long and it won't make a speck of difference.  The plan works for us.  The plan works!      

Rev Up the Payoff Engine...again

It's been a nice little hiatus.  Last year was pretty intense having paid off one of three remaining rental house mortgages.  It wasn't easy, but then few worthwhile goals ever are.  Worthwhile goals require sustained focus and determination in order to achieve them.  However, once achieved, the level of satisfaction is hard to beat.  Such was the case last December when I achieved my stated goal and paid off house #1 of 3.  Let's do it again!!!

My next house (House #2) had a balance of  $57,619.00 when I started this blog in January, 2013.  By December, 2013 the balance was down to $54,459.00.  I'm excited to report that I just made a $9,000.00 principle payment yesterday thus reducing the current balance on House #2 to $43,979.00.  When house #2 is paid off by this time next year, an additional $498.01 will be added to my monthly income.  The interest rate is 4.5% on that 15 year mortgage, so any additional payments toward principle equate to a guaranteed 4.5% risk-free return.  Not great, but not bad either.  I, however, am looking at it another way.  $498.01 x 12 (months) = $5,976.12 in annual income.  To see my return in terms of percentage of "cash on cash" return I'll divide the $5,976.12 by $54,459.00 to achieve an 11% annual return.   Granted, that's a very rough calculation, but it helps me to visualize the reward side of the equation.

The income is only half of the equation.  The elimination of the mortgage debt is just as satisfying.  After house #2 is paid off, then all focus will shift to the third and final mortgage on House #3 which currently stands at $65,816.00.  The goal is to see all of this accomplished by July, 2016 or 3.5 years from when I started this Mortgage Payoff Marathon.

Paying off debt while increasing passive income is what it's all about.  By July, 2016 I could theoretically retire early (or be considered "Financially Independent").  My rental income would be in the neighborhood of $2,300.00 per month.  With a paid off house and zero debt that would be doable to be sure.  Likely, I'll begin to put any additional income into Dividend Growth Income equities.  That is where my heart lies.  But I started in real estate investing back in 2004 and will see it through.  While real estate makes for excellent diversification and inflation protection, I'm really looking forward to building a DG portfolio!  I don't want to do both at the same time.  I want to eliminate ALL remaining debt while increasing my passive income; (arguably "passive" as I use a rental management company to care for all the day to day headaches of being a landlord).

So, I'm back, rested and ready to continue with this aggressive goal:  Eliminate $177,650.00 of mortgage debt in only 42 months!  Far less time than it takes most people to pay off a new car loan.  We're now 17 months along with just over two years remaining to achieve our worthwhile goal.  At this time we are exactly where we're supposed to be.

We'll try to keep a balance while achieving this goal.  For example, we intend to travel to England and Ireland later this year and Costa Rica the next.   Fun times with good friends will keep us from burning out along the way.  Let the Marathon continue!