Long Term Strategies for Balloon Payments

[Michael R.]

Hi All. I am investing in a 3 family house via an LLC, non owner occupied, so I will be taking out a Commercial Mortgage. I'm putting approx. 75% down and getting a 5-5.75% loan on a 10 year term amortized over 25 years.

The question I have is regarding preparation for the balloon payment in 10 years, assuming I choose not to refinance. Does anyone have any good recommendations for investing the cash I save for the balloon pmt? I can take the total principal that I will owe at the end of the term and divide it by 10 years to see how much of the rental income I need to save per year, however I would rather not do that as it will reduce my cash flow more than I would like. I was thinking of saving between 50-75% of the total balloon payment and investing it. Aside from low yielding money market accounts and CDs, what other options are there? I don't want to throw it into a volatile stock market. I don't know enough about treasury bills but I assume that's an option? Any strategy ideas would be appreciated. Thanks.

[Bryan Hancock]

Or how about taking that money you would be committing to prepaying the mortgage and making it work hard in a flip or new development project? You can buy a discounted note or do any number of other real estate techniques described on this site to make your money work much harder.