Friday, August 1, 2014

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.


Investing Early said...

Looks like you had a great month! Quickly glancing at the graph shows you may finish the payments at least 5-6 months ahead of your target, if you continue your trend.

Keep up the good work!

Pay off my rentals said...

Thanks, IE!

It was a very good month, or three months. We'll see how it goes. Either way, worst case scenario, this one will be gone about 12 years ahead of schedule.

I took a run over to your blog. You seem to have a definite plan in the works and I see real estate is a big part of that plan. You'll certainly be able to get to your FI date faster with real estate than with dividends. I love both as a source of passive income. Dividends because they are as simple as it gets, but rental real estate because you can get more bang for each invested buck.

Thanks for stopping by!

No Nonsense Landlord said...

It's always great to see another successful landlord. Keep up the grate work. Be sure to have some cash around for some emergencies too.

Pay off my rentals said...

Thanks, NNL.

That's always good advice. I'm admittedly low (okay...currently at zero) on my rental property emergency savings. It's a calculated risk because I can cash flow most any unforeseen issue. Something large like an HVAC unit replacement would hurt. But for now I'm comfortable using the savings toward payoff. I'll change course once house #2 is paid off and rebuild the rental e-fund.

Investing Early said...

Its funny you say that, I had an HVAC issue last month. This caused an unforseen bill of 1800$. It wiped out my 1200$ e-fund and almost every penny of cashflow for the current month.

Having a 400$/house emergency cushion proved quite helpful. Problem is I had to burn through it all at once.

Pay off my rentals said...

I hear ya, IE.

I've had as much as $7,000 in repairs and replacement hit in the same month. Those, albeit rare, unforeseen issues hurt like the dickens. I'm a big believer in landlords having an eFund for precisely the reason you mentioned, I'm just able now to run without one (temporarily) because my cash flow is very strong due to having paid off my other rental houses.

Angela Brooks said...

Hey, I had a great time reading your website. Can I contact you through email?. Please email me back.