All Forum Posts by: Ericka G.

@Thomas S. Thanks for chiming in. Just to make sure I'm tracking - are you recommending I pay-off the loan and then do the HELOC or keep the mortgage (do NOT pay it off) and take out a HELOC on my existing equity?

@Jerry Padilla perfect.  Good to know.  Thanks!

@Theresa Harris thanks for chiming in. I don't have any other plans for the money...I am running the calculations that you suggest and it does look like it makes sense to pay off the mortgage, invest 25% of what is left and then do a HELOC if I need to access the equity later. It's hard to justify paying $30k+ in interest over 5 years when I don't need to and would still be investing in the market seeing gains. I'm sure the leverage fans are cringing at this type of analysis though.

@Shaun Weekes Thanks for clarifying, this makes a lot of sense - 25% in an index fund and then putting another chunk in an annuity or something more secure. Lots of food for thought.  I also took a hit in 2008 but left everything alone and saw it bounce back so that maybe gave me a false sense of "it all works out in the end" when it comes to market volatility.  I really appreciate the input.

@Shaun Weekes thanks for the input.  I'd honestly never considered an annuity since I'm in my 30s and always thought that was a product for folks in their golden years (likely a misconception).  Do you think an annuity makes more sense than an index fund then due to market instability right now?  I agree having large amounts of cash sit in a savings account isn't smart...the chunk of cash I'm considering using to pay-off the mortgage kind of snuck up on me due to selling a property ahead of schedule and unexpected work bonuses.

@Jerry Padilla Thanks for the input, good food for thought - I hadn't thought about a HELOC and didn't consider that I could get one after the loan is paid off. Do you have an idea of what closing costs tend to be on a HELOC if I were to get one for the same amount as I would have refinanced? Let's say $118k? I like the idea of having access to money that I'm not paying interest on until I use it.

Bump...anyone?

@William Huston  I hear this debated all the time and think a LOT of people make the mistake of assuming it is always better to own than to rent.  The previous poster explained it well - you have to do the math yourself...if it is cheaper to rent than to own and you don't want to be tied down to one location, then rent.  If the cost of your mortgage and expenses is less than the cost it would be to rent in the same target area, then it makes sense  to own.  

When evaluating whether to buy or rent, I also look at exit strategies...so in addition to PITI being less than the cost to rent something similar, I'd only buy if I know I could become a landlord if needed and rent the place out cash flow positive if I decide to move.

Hi all,

Need some advice. I moved into one of my rentals full time. It was purchased on a 5/1 ARM at 3.875% about 5 years ago and started out as an accidental house hack due to a temporary out of state work assignment. Our initial plan was to live here for 5 years and then move to a nicer primary residence. But, plans changed and I've decided to stay here. I achieved financial freedom about 4 years ago but still work a W2 that I really like because...why not?

Loan is now due to adjust to 5.125% and my monthly payment would jump up around $100/mos if I stay with current mortgage provider (who I detest).

Details...

3/2.5 townhouse in trendy, walkable class A area

• Original purchase price: $142k
• Current value: ~$300k
• Balance owed/payoff amount: $112k
• Current monthly PITI: $820/mos @ 3.875%
• HOA: $390/mos (includes water, trash, sewer and all exterior maintenance + pool and clubhouse access)

Option 1: refinance with new lender

• 4.375%, APR 4.663% - 30 year fixed
• PITI: $840/mos
• HOA: $390/mos
• Closing costs: $4-6k (lender says these will be rolled into the loan/absorbed by appreciation so my out of pocket will be very little)
• I’d been moving ahead with this option but noticed that I’d be paying $30k in interest over the next 5 years and the total interest percentage over the 30 year loan would be 79.92% :(

Option 2: pay off loan balance of $112k

• Monthly payment: $390/mos HOA + insurance and utilities other than water, trash, sewer
• I’d still have six figures+ of cash reserves after paying off the loan
• Save $30k+ in interest plus $4-6k in closing costs

Option 3: allow loan to adjust to 5.125%

• PITI: $950/mos
• HOA: $390/mos
• No closing costs, still paying principal down at a good clip
• Downside here is that it can keep adjusting up every year and I detest my current loan provider, so I hate to keep giving them my business

I know many will recommend a cash out refi to buy more property or invest, but I already have ample cash from selling a property and my portfolio is in a good place where my rentals cover my monthly expenses if I were to quit my W2. I’m also self-managing 7 units (all but one owned outright). I have been looking to possibly add 1-2 more or a small multi but haven’t seen any deals worth moving on recently.

Any recommendations on the best course of action here? What would you do and why?

@Chris Butler I’ve owned 10 units (currently have 8) and found the 1/1 my trickiest thus far. I have a solid comparison since it’s in a triplex with two 2/2.5 and those units in literally the same location have had far less turn over. The 1/1 has had 4 tenants in two years, total pain.

I think the other posters hit the nail on the head that location is key for 1/1s. If you are in a hip area that caters to well-heeled young professionals, class A or B, you’ll do fine. Mine is in a B- area that is more residential, so the 1/1 tenants are mainly just looking for something inexpensive near their place of employment. I’ve had to screen rigorously but even then have had 3 flighty tenants break their leases early: first got a job transfer out of stare 2 months after moving in, 2nd changed his mind about the place the day after moving in and took me to court to try and get his security deposit back (he lost), 3rd claimed she had cancer and moved out with no notice, the 4th is a cop and he has been no trouble so far but does have a serious gf in a hipper area so I’m guessing he will move to her when his lease is up and I’ll have to start the whole process again.

I don’t think I’d buy a 1/1 again unless in a very specific type of location.