35% return if loan paidoff

4 Replies

I have $100K outstanding balance on the mortgage for a property that has $2500 in monthly rents. Taxes + insurance + maintenance + property management fee is < $1100/month. Hypothetically, If I payoff the loan tomorrow, I save 35k in loan interest that I would otherwise pay over the course of the loan. Isn't that almost 35% immediate return on my 100K? Over that I will have $16.8K in cash flow each year. Is my line of thinking correct?

What could you make if you invested the $100k in another property? I'd be trying to find another deal that cashflows like that. Then I'd be trying to pull the equity out of both of them to find another one or two.

I’m with Connie, you’ll probably make much better return by investing in another property.  Pay off that mortgage and you’ve decided that’s enough.

Originally posted by @Wayne Brooks :

Whatever the interest rate is on your loan....that is Exactly your annual rate of return/yield  by paying it off. 

 That's not factoring in opportunity cost. If that money could be invested elsewhere for a higher rate of return, then you're losing by paying it off. At the rates for the last 10+ years I've owned property, it makes no sense to pay early.