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Actually, now that you mention it, take PMI into consideration after B is paid off. I'm unsure of what properties still have the PMI but I do recommend you put the extra money towards whatever still has a PMI, THEN follow the D>C>A payoff schedule because I agree with you, PMI is wasted money.
Agreed. Properties C+D have PMI, so the payoff schedule still applies. I am considering splitting the extra cash flow to get below the PMI threshold for both properties.
I'd say pay off the $22k loan right away, as in, write a check right now. You can get a HELOC if you need liquidity, but you gain the advantage of only paying interest between the time you buy the flip and when you sell it. You'd pay no interest (on that amount) between flips. With the $22k loan you are always paying interest even when you aren't using the cash.
I am not touching the $130K because that is set aside for a different strategy that I don't want to discuss here. Also, my tenants are paying interest on Property B. I'd like to keep the financials limited this basket of properties only, meaning the revenue that is generated is used for the accelerated paydown.
Think again. Now at one time I wanted paid off properties until I realized it did not make sense.
I did refi down to 15 year mortgages chasing rates. I've bought as high as 12% and when things got near 6% I grabbed the lowest rate I could thinking this was a once in a lifetime opportunity.
I've realized that paid off properties are not making you money. I'm retired so I want my properties to pay me. I recently took a $1800 a month "cash flow" from rent increases and turned it into nearly $400,000 lump some. I'll be able to do this every couple of years with my portfolio of properties and my LTV is STILL decreasing. Would you rather have $1800 a month or a $400,000 lump some?
House rich, cash POOR? I agree with you that a paid off house should be worth something but my recent experience shows how the BANK could force you to SELL your property if you needed some cash or if they let you keep it they will probably charge you and arm and a leg JUST to get the extra money you stuck back into it.
The property I was taking money out of (less than 50% of value) WAS paid off and I have a low LTV on all my properties BUT they made me file for SS AND set up monthly payments out of retirement accounts!
UM, WHY? I'm not taking money out of those accounts BECAUSE I don't need the money and plan to delay SS til 70 because I don't need the money! It's there if I need it to pay you, why isn't that enough? Of course I stopped SS and the retirement accounts after the loan funded. But that is the idiocy that you will come upon from banks. I also have TWO govt. pensions and nearly a 40 year rental history.
Paid off house ain't worth what you'd think it should be.
I appreciate your insights. I believe we're in different phases of life and have different priorities. For me, 4X my current cash flow + having these 4 assets fully paid off is important.
Please keep in mind, this is just one facet of my financial profile -- I am not discussing the other areas as they are not directly related.
Agreed. Properties C+D have PMI, so the payoff schedule still applies. I am considering splitting the extra cash flow to get below the PMI threshold for both properties.
How much do you need to pay down C and how much do you need to pay down D to eliminate PMI?
How much do you need to pay down C and how much do you need to pay down D to eliminate PMI?
I need to run the updated numbers, however I am estimating about $36K across the two properties to bring them to 78% LTV, which will knock out the PMI. I might be able to get the PMI removed at 80%, however need to consult the mortgage docs.
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