All Forum Posts by: Lee Ancona

OK, that would be great. I just calculated some of the stuff we have been talking about. My current mortgage is $450. $350 to interest and $100 going to principle. If i take the same scenario and apply the remaining money to the principle of property 2 it will be $650 to principle a month and the remaining $350 to interest. that's if I utilize the plan and come in with $300 of my own money on top of the rental income of $700 a month to equal $1000.

So, crunching these numbers would equate to Scenario 1 is $650 extra month to principle x 12/months is $7800/year. the current balance on property 2 is $55,000. So $55,000 divided by $7800 a year on the extra principle would take 7 years to pay off. 

Scenario 2 would be to utilize the tenant income for everything and not come in with the extra $300/month from myself so it would look like $700/month rental income minus mortgage which is $450/month, which equals $250 extra per month towards principle. So $250/month principle x 12/months is $3000/yearly extra on principle. $50,000 divided by an extra $3000/yearly principle payment would take 16 years.

Scenario 3 is to utilize the HELOC and pay off property 2 and yada yada like above. $700/month rental income all goes towards the HELOC note which is would equate to $700/month x 12 is $8400/year. $50000 divided by $8400 is 5.9 years to pay it off.

Scenario 4 is the same as above, however I add my exttra $300/month on toop of rental income of $700/month to equal $1000/month being applied to the HELOC note. $1000/month x 12/months is $12000/year. $50000 divided by $12000 is 4.1 years to pay off the HELOC note.

I hope I am seeing it in clear vision lol. I would love to see the spreadsheet that you are talking about and the amortization regarding the HELOC and property 2 numbers.

Lee

to be honest, I haven't and I have just been looking into and crunching numbers. I think i am missing something though. Because I see that a HELOC note will not have a prepayment penalty, so i can put down almost $800 more on principle each month for 4 years opposed to 26 years. I'm sorry if i am repeating myself regarding, this but there is definitely something i am missing. I am new to this and trying to learn everything I can about the HELOC or even second mortgage to payoff property 2. Can we go off a rough estimate of the current prime plus or minus a couple minutes for rise of the interest rates over the next couple of years? and compare. i think i see it as being free and clear with both notes within 4 years vs 26 years. And I think I see what your saying that it will just come down to how much I really save in interest in the end. The part I am not getting is that i would continue to pay this interest for 26 years vice 4. Please help me understand lol.

Lee

And in the end the HELOC monthly payment just estimating lets say $200/month, the rental income of $700 a month is 100% none of my money and just income paid from someone else. Now the entire $50,000 could be paid off with their money in 1/5 the amount of time as I am currently paying. If i keep the current loan what it is at at least 15 more years will yield $300+ in interest to the bank, which is $300 x 12/months x 15/years is $54,000. what are your thoughts??

Lee

Thank you for your reply. I see what you're saying, however, one is over 26 years and one is over 5.9 years, a ton of interest to be saved. I understand the interest could jump yearly at .25% at a time roughly though. Additionally, I could put down a lot more than the 700 profit from the rental income towards the HELOC note. Am I looking at it wrong 26 years of paying 350+ a month interest (current mortgage) vs paying interest and principle on the HELOC in less than 5.9 years. If I pay an extra 300 on the HELOC note for a total of 1K a month, so 12K a year it would be paid off in 4 years opposed to 26 in the end. Maybe I am looking at it wrong???

Lee

Hello guys/gals,

I have been browsing through bigger pockets for some time now and finally ready to post some questions and comments. First off let me explain who I am and where I come from. I am currently active duty military actually forward deployed in support of OEF. I am from Southern California and own a couple of rental properties near the base in Southern California as well as one in Phoenix, AZ. I am 27 years old and expecting my first child at the beginning of November. I want to provide a life of financial independence for my family and not have to worry about money. I have owned the aforementioned properties for about 5 years now and have built some equity in them. Ok enough about me and here are my questions(s).

Property 1 in phoenix, AZ original purchase price 120,000 in 2009 at 5.5%, I refinanced last year and current balance with the refinance cost into it is 115,000 and interest down to 3.25%. Monthly mortgage with insurance and property taxes included is $750 a month with $46 HOA fees on top. House was appraised at $188,000 this year. This is also a VA loan. Rental situation is I pay a property management company to manage the property and they just signed a new tenant to a 2 year lease (that's great J) at $950 rent. Property management takes up 75$ a month for management fees. So in the end the numbers aren't the greatest at $950 (rent income)-$750 (mortgage, insurance, property tax)-$46 (HOA Fees)-$65 (landscaping fee)-$75(property management fees) = +$14 a month.

Property 2 in Southern California was purchased for 75,000 in 2009 at 4.25%. I utilized the conventional loan and put down 15,000 and current balance is 55,000. Monthly mortgage with insurance and property taxes included is $450 a month. Property 2 was appraised at $85,000 this year. I have tenants in the property and current rental income is $770 a month and property management takes $70 a month. Numbers are $770 (rental income)-$450 (mortgage, insurance, property tax)-$70 (property management fees) = +250 a month.

There was the breakdown of the properties so there isn’t any confusion, sorry if I put too much or confused anyone.

My question is regarding HELOC. Here is my thought and some numbers, please advise and tell me if I am missing something or this plan looks solid.

I was thinking about taking out a HELOC on property 1 and paying off property 2 completely. This would leave property 2 with no balance minus this HELOC monthly costs. However, here are the numbers as I see it. Property 2 has 26 years left until the current loan matures, which will incur a total cost of $145,000 dollars total and $70,000 in interest. Current rental rate is between $750-$800/month minus the property management fees and that's $770-$70=$700/month profit 100% after I use the HELOC to pay off property 2. That's $700/month x 12 months is $8400/year. If I go further and break that down to the current length of the loan that's $8400/year x 26 years left, which is $218,400 (all profit opposed to interest to the bank and or original loan).

I understand I still have to pay the HELOC of $50,000 from property 1 back; I would re-invest the 100% profit of $700/month from property 2 which is $8400/year. $50,000 divided by $8400 is 5.9 years. So that is 5.9 years to pay off the $50,000 opposed to 26 years and a lot more profit in the end for me opposed to anyone else. I understand there are other fees, costs, vacancies for the rentals, broken items, etc.What are your guys's opinion's regarding this scenario.

Thanks

Lee