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Also, as soon as we clear any debt on the 5% we can transfer some of the balance from the high interest card to that one. So it's beginning to seem like more of a solid plan.
I really appreciate all this very constructive advice!
Pay of the 19% card, borrow the money at a lower interest rate to do the remodel. You should be able to borrow against the rentals are just take out a personal loan for much less than 19%. I agree, there's no reason to leave it sitting there vacant however. How much is it costing in property taxes, insurance, etc?
Pay of the 19% card, borrow the money at a lower interest rate to do the remodel. You should be able to borrow against the rentals are just take out a personal loan for much less than 19%. I agree, there's no reason to leave it sitting there vacant however. How much is it costing in property taxes, insurance, etc?
Borrowing is out of the question, unfortunately. We have used pretty well all our leverage and as I mentioned, it's not possible to borrow if the investment properties are in a country in which we don't reside. Right now the empty unit costs us nothing as the other taxes and insurance are for the entire building. The only cost right now is that we keep on having to board it up after people find their way inside. LOL. Someone has left 4 large boxes of dirty magazines and lots of empty liquor bottles... homeless people?
Location: 23.7 million to 162 million miles North of Venus
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Quote:
Originally Posted by Vectoris
Borrowing is out of the question, unfortunately. We have used pretty well all our leverage and as I mentioned, it's not possible to borrow if the investment properties are in a country in which we don't reside. Right now the empty unit costs us nothing as the other taxes and insurance are for the entire building. The only cost right now is that we keep on having to board it up after people find their way inside. LOL. Someone has left 4 large boxes of dirty magazines and lots of empty liquor bottles... homeless people?
Since you're in between a rock and hard spot, because you live in a different country than where the rental property is located, then doing the remodel and renting the unit out is probably the best plan. And, if there are people breaking into the empty unit then I'm sure the renters in the other units will be relieved once the empty unit is finally rented out and the break-ins stop.
As for the 19% card, is your credit good enough to qualify for another credit card that offers a 0% interest, or low interest, balance transfer? Or perhaps a low interest personal loan?
OP, such a question is near and dear to my heart. It is a tough decision. I would normally say pay off whichever debt is going to cost you the Most in interest, but this ALL goes out the window.
Why? Because credit cards have VARIABLE interest rates, and you should not have a variable interest rate debt if you can help it. Technically, your terms or rates could change in ways that could be really BAD (really bad) for your finances. Interest rates are sadly poised to go up...probably. I'm saying this not as an expert, but because interest rates are really LOW now. So where else can they go over time but up?
You could do a lot of math and comparison to decide which is the most expensive debt...but I suggest simply:
1. Pay off the 19% card.
2. Put 2K in your IRA or do something else to save it.
3. Put 3K in cash savings.
4. Find out if there is a balance transfer offer for the paid off card. You can call and say you want to cancel the card. That's when the CC company usually tries to lure you with a balance transfer offer.
5. If there is a lower interest balance transfer offer, transfer part of the balance of the 20 K card. BUT do math first to see if you are going to save money even with the balance transfer fee factored in.
Hopefully you are able to deduct any interest that you DO end up paying on your taxes at the end of the year.
Since you will have less debt to service, you can save up cash to pay for your renovation. The money that you'd be paying toward debt service and INTEREST could all go to save for the renovation. Even if it takes you a couple of years to save the money, it is good.
I doubt rent is going to decrease. It sadly keeps going up. So in 2 years when you do your reno and have a lot less debt, you will STILL benefit.
Tip: if anyone is charging you 19% interest, it is a sign that you are OVER leveraged. IMO. OK, it is not really good. Wait a couple of years until you are in a better position to do the reno, and make sure you have a little cash in the meantime for emergencies.
Location: 23.7 million to 162 million miles North of Venus
23,835 posts, read 12,670,098 times
Reputation: 10558
Quote:
Originally Posted by kinkytoes
OP, such a question is near and dear to my heart. It is a tough decision. I would normally say pay off whichever debt is going to cost you the Most in interest, but this ALL goes out the window.
Why? Because credit cards have VARIABLE interest rates, and you should not have a variable interest rate debt if you can help it. Technically, your terms or rates could change in ways that could be really BAD (really bad) for your finances. Interest rates are sadly poised to go up...probably. I'm saying this not as an expert, but because interest rates are really LOW now. So where else can they go over time but up? The OP lives in a different country, no telling what the interest rate structure is in that country or how that structure is expected to change.
You could do a lot of math and comparison to decide which is the most expensive debt...but I suggest simply:
1. Pay off the 19% card.
2. Put 2K in your IRA or do something else to save it.
3. Put 3K in cash savings.
4. Find out if there is a balance transfer offer for the paid off card. You can call and say you want to cancel the card. That's when the CC company usually tries to lure you with a balance transfer offer. Meh, not so much these days. More than likely if the OP calls to cancel the card the CSR will immediately cancel the card, then tell the OP to have a nice day. It would be better to straight out ask if there were any BT options on that card.
5. If there is a lower interest balance transfer offer, transfer part of the balance of the 20 K card. BUT do math first to see if you are going to save money even with the balance transfer fee factored in.
Unless it's a 0%, it will be hard to beat the 5% that is currently on that card. And at paying $250 a month on that card it will have to be at 0% for many years (6+) - not possible.
Hopefully you are able to deduct any interest that you DO end up paying on your taxes at the end of the year.
Since you will have less debt to service, you can save up cash to pay for your renovation. The money that you'd be paying toward debt service and INTEREST could all go to save for the renovation. Even if it takes you a couple of years to save the money, it is good.
I doubt rent is going to decrease. It sadly keeps going up. So in 2 years when you do your reno and have a lot less debt, you will STILL benefit.
$750 a month in rent for two years is $18,000 - that's a lot of money to give up. Plus the other current renters may have issues with the break-ins in the empty apartment, especially if it's over a 2 year period, which would come back on the OP - through either lawsuits or legally breaking their leases because of the danger, leading to further financial loss to the OP.
Tip: if anyone is charging you 19% interest, it is a sign that you are OVER leveraged. IMO. OK, it is not really good. Wait a couple of years until you are in a better position to do the reno, and make sure you have a little cash in the meantime for emergencies.
That's a possibility, but it's also a possibility that the higher interest card is one of the OP's oldest cards, where she'd gotten it while building credit and higher interests are the norm for those building credit. If that card is older than her 5% card then it's not a sign of being over leveraged, if it's newer than the 5% card then you're may be correct
I don't like seeing someone pay high interest anymore then the next person, but any way the OP goes there is going to be a financial loss of some sort. If the OP renovates and rents that apartment, and also moves the high interest amount to either a low or no interest balance transfer or to a low interest personal loan, then the loss might be lighter than the proposals you had mentioned.
Most places just need heat and water to be rented. What exactly "NEEDS" to be remodeled...and for $15k? How handy are you? How much of that $15k is materials and how much is labor?
Amazing what a good cleaning, new carpet, and paint will do...and you should be under $2k for that.
Pay off the credit card, roll up your sleeves, and get to work.
Location: Went around the corner & now I'm lost!!!!
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Quote:
Originally Posted by joe moving
10k @ 19% is pretty bad. Pay it off, put 5k into the apartment and do the rest later. JMO.
Good advice here. I did this with my rental property last year, 4K went to a 30 yr roof and another 3K of cosmetic upgrades (i.e. removed carpet and put commercial vinyl tiles, paneled doors in hallway, tiled backsplash and updated kitchen appliances). I did this for three reasons
1. ease of cleaning when renters move out
2. upgrade to attract renters or when I'm ready to sell it attract more buyers
3. Tax write offs for improvements/upgrade
Most places just need heat and water to be rented. What exactly "NEEDS" to be remodeled...and for $15k? How handy are you? How much of that $15k is materials and how much is labor?
Amazing what a good cleaning, new carpet, and paint will do...and you should be under $2k for that.
Pay off the credit card, roll up your sleeves, and get to work.
LOL What? Which unregulated, uninspected eden do you have rental property in? I'm being only mildly facetious. Please tell me where this is true.
I assume you aren't able to rent out the 3 bedroom apartment? 15k on remodeling suggests the place is in awful condition.
If it isn't, just slap on a new coat of paint, toss in some new carpet (and maybe flooring in the kitchen/dining/bathrooms and you're good to go for a few grand - spend the rest paying off that highest interest credit card.
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