All Forum Posts by: Chris P.

I've thought of the bandaid analogy myself quite a few times with this property.

The $1200/mo is P&I and expenses (tax, ins, repairs).

If we ignore the recent depreciation of the property, and assume the tax incentive is a wash, then I question if I'm actually losing money in the long term.

Yes, I'm paying out a lot each month in order to pay the loans off but once the property is free and clear (4-5 years) I'll have a good flow of cash coming in off of it.

Is my reasoning unsound?

Is 4-5 years of negative cash flow inadvisable for the long term?

As you can tell, I'm really wrestling with what to do here..
I'd like to keep building out my portfolio over the next 15 years with the goal of about 25 units but I really don't know if this property is going to help achieve that goal.

Thanks for the reply, Paul.

Yes, I'm equipped to handle the management and repair (including major repair) of the property as it may be needed. My folks have slowly acquired a portfolio of several properties since I was a kid so I've kind of "grown up" with my toes in the business.

Their strategy has been to pay the properties off ASAP and so something that concerns me about the REFI is that it will be into a 30 year loan whereas if I keep throwing extra money at the existing loans, the property should be paid off in under 5 years.

The property should appreciate over time. It's located in a popular area. But it is an older home which was built in the 1920's and I'm expecting some significant repair in the next 5 years (roof & bathroom renovation).

So I guess I'm trying to weigh the benefits of having the property paid off in 5 years but at the cost of extra income and the opportunity cost of my extra cash during that period.

Hi All (it's my first post),

I'm looking for some ideas on how to improve my situation with my only rental home so I can be in a better position to pick up some more properties.

A few years ago we took out a HELOC on our primarily SFD to finance some land and build a new home. The plan was to sell the old home once we moved to the new home. At the time, market prices would have covered both the initial mortgage and HELOC on the first house but things didn’t workout that way.

So the situation now is I owe 110k on a SFD with P&I and expenses around 1200/mo but property is renting at 800. So I’ve got a negative cash flow of 400/mo going to this property.

The loans on the home are 15 year loans with about 10 years left. The interest rates are 5.5 for the mortgage and 6.75 for the HELOC.

Recently I started putting most of my extra monthly cash (3k) towards the HELOC to try to pay it down but I’m questioning the wisdom of this.

Here is what I think my options are:

Cut the property loose? The market value (I looked at comps) is probably just north of 100k so if I sold I would take a little bit of a hit.

Refinance the two the loans into a lower rate roan. REFI costs of about $3k but would lower the monthly payment to about the break even point.

Continue to throw all my extra income on the home. Pays the loan off early.

Any thoughts?