Wednesday, December 4, 2013

The Payoffathon

<<<WARNING!!!!>>>>  Be advised that the following post contains some really exciting news...

When I was a youngster living in California I thought it'd be really cool to do the annual Walkathon (walking marathon).  It was a 20 mile course and it took the better part of the day to complete.  It was for a good cause, the fight against Muscular Dystrophy as I recall.   While it was a selfless act aimed at doing my small part in the battle against a debilitating disease, it isn't as if I personally got nothing out of it.  First of all, I received the greater joy of giving.  I also got the really cool feeling of accomplishing something I still think is extraordinary: I walked TWENTY STINKING MILES!  It started off fun.  Thousands of people all excited and eager to reach the goal of walking all those miles for a good cause.  Then, as the miles drew on, it just got harder and harder.  The crowds began to thin and there were noticeably less and less people walking the walk as the day drew on.  Some simply got tired, others bored,  having lost their enthusiasm.  Now understand that you're not obligated to complete a Walkathon in order to benefit the cause.  You'll get credit for each mile you walk as you pass the checkpoints and get your card stamped.  Then your sponsors--who agreed to contribute "x" amount of money per completed mile--would be obligated to donate the resulting sum.  It's a neat concept and one not too dissimilar to paying off one's mortgage(s).
In the beginning, it's exciting and your full of energy and zeal to get the payoff race going.  With the course plotted, you're off and running!  Then, as the pay-down continues, it gets harder and harder to maintain that initial burst of enthusiasm.  As each additional payment to principle and interest leaves your bank account, all you have to show for it is a slightly reduced loan balance each month; very much like getting your Walkathon card punched at the completion of each mile.  How does anyone maintain the zeal to get to the end of a long debt payoff journey?  At some point you must decide upon whether you want to look at how far you need to go in order to complete the journey, or how far you've already come; what you've already accomplished.  The former can be discouraging  while that latter encouraging.  Then, (and I speak from experience here), as you get closer to the finish line, things reverse.  Now you begin see how far you've come and how little you lack towards reaching the goal...completing the long journey.  Yes, much of personal finance is mental and emotional.  It's rarely about cold, hard math.  That's why personal finance blogs are so popular.  They do what a simple calculator can't, they encourage us.  They stimulate us.  They keep us determined and resolved to complete what we've started, especially when we're beginning to feel tired and bored with the seemingly endless journey.  In the end, however, just as I will never forget that I walked TWENTY STINKING MILES, you'll be able to say: "I PAID OFF $75,000 or $100,000 or $200,000 STINKING DOLLARS OF MORTGAGE DEBT!!!"  It's a tremendous accomplishment and a race that's worth the sacrifice.
Well, this month I just had my Rental Mortgage Payoffathon card punched.  I paid off one of three remaining rental property mortgages.  The mortgage on House #3 is now officially history!   I walked into the bank, asked for the payoff statement and subsequently paid $1.00 for a cashier's check to pay off the balance of $3,499.63 (including a $13.00 "Release Fee").  Upon handing the check to the customer service rep, she took care of a few housekeeping details and returned to congratulate me.  Done!   I have now accomplished something really outstanding...I own--free and clear--five of seven houses (one of them being my personal residence)!

Jan 1, 2013 (Beginning Bal)                        December 31st, 2013                    Amount Paid  =======================================================================
House #1 - $70,908                                        House #1 - $67,437                        $  3,471
House #2 - $57,619                                        House #2 - $54,459                        $  3,160
House #3 - $49,123                                        House #3 - $   0                              $49,123
-----------------------------                                   ----------------------------          ---------------------------
Total:       $177,650                                                         $121,896                        $55,754 (-31.38%)

As you can see, we've paid off nearly a third of our total rental real estate mortgage debt this year alone.  I don't know if we can keep the same pace up this year or not.  I have some dental work I need done as well as a trip to England & Ireland we are saving for.  That trip will be paid off before we take it, rest assured.

I still lack two more checkpoints to finish this rental mortgage Payoffathon.  I should be able to accomplish that in approximately 2.5 years or a mere thirty months.  At that point I could conceivably go from semi-retirement to early retirement.  I relish the thought of greater freedom.  Freedom to pursue more fully the things that bring the greatest pleasure and fulfillment.  That's the goal.  That will be the final stamp on my Rental Mortgage Payoffathon.



Evan @ My Journey to Millions said...

Congrats! That is awesome

Pay off my rentals said...

Thank you, Evan!

If you have the plan in place, time takes care of the rest. I remember when I started this Blog in January thinking of the challenges I would encounter over the next year while attempting to pay off this property in rapid fashion. Well, here I am one year later and it's done. However, while concentrating on Property #3, I should not overlook the fact that making the regular payments on properties #1 and #2, I have dropped the balance a total of more than $6,600.00. No small potatoes there. Time simply took care of that with no real additional effort on my end.

Stop back by from time to time. to your blog!

I'll stop by to check out your Journey.

The Executioner said...

Well done! Looking forward to seeing you attack house #2 in the coming months.

Pay off my rentals said...

Thsnks so much, Executioner!

Forward and onward. Another 12 months and I'll hope to be close to finishing up number #2. By the way, I sure miss your blog posts. I appreciate your stopping by.

Unknown said...

Great to see another personal finance goal reached. My wife and I plan on using rentals as our passive income stream to help us reach financial independence as well. We're only at Rental #1 so far. I was a bit puzzled at your portfolio page though. With so many properties giving you 100% cash flow (minus expenses), why is the annual figure so low? I was figuring 4-6 properties may be enough for FI for us after they're paid off.

Pay off my rentals said...

Hello, Danny. Thanks for visiting and thanks for reminding me that I need to update my portfolio page.

When you mention expenses, I find that many landlords consider them differently as they relate to their cash flow. I only count as cash flow what's left after I remove 10% of the gross rents for maintenance and 8% of the gross rents for vacancy. Additionally, I use a rental management company that charges around 12% of the gross rent. Therefore, I really should be showing true, free cash flow of about $1,263,00 per month. That will bounce up to about $2,300.00 per month when I finish paying off the other two rental properties. If I self manage, I can boost to about $2,700.00 p/mo. Just not sure I want to. We'll see.

Thanks for visiting.

Unknown said...

Congratulations on reaching a milestone on your mortgage payment. Second, what a nicely written blog post! I think the analogy to the walkathon was brilliant. I agree that it's human nature to lose motivation as time passes by and the things we were originally excited with becomes routine. That's why I find it useful to be creative and look for ways to keep the motivation up from time to time. In your case, it is writing and I can't agree with you more. Jotting down your thoughts allows you to keep track of your progress and motivates you all the more to push on towards the goal.

Season Reza @

Pay off my rentals said...

Wow! Thanks so much, Season! Those were some very kind words.
I've found that since paying off this most recent rental house, I've been searching the internet blogosphere for even more encouragement to press on. I really do find that reading other's comments and commitment really helps. Stop by again.

Compounding Income said...

Wow! Congratulations! 5 of 7 houses paid off... that's unreal. 2.5 years till retirement, I'm jealous ;)

No Nonsense Landlord said...

Congrats! I have 8 units, out of 24 paid off, so I am looking forward to paying another one off.