We recently sold a commercial piece of land that was not making any money. We sold it and now have a large amount of cash on hand $127k. My current portfolio looks like this:
House 1: Cash Flow $475.00 Current Mortgage owed 67k
House 2: Cash Flow $440.00 Current Mortgage owed 57k
House 3: Cash Flow $330.00 Current Mortgage owed 158k
These were my courses of action COA that I came up with:
COA 1: Pay off house number 2 and increase my cash flow, to $825.00 and would also be debt free on that house. That would leave me with $70,000 cash on hand to either buy another rental, or just keep as reserves.
COA 2: Pay off house number 2 and 3, increase my cash flow to $1700 between both houses. Both houses would be completely paid off, Id sleep well at night. This COA leaves me with only $3,000 in the bank though...
COA 3: Don't pay anything off and just keep saving my money, which I have $127k on hand. Everything would be leveraged. Possibly buy another property when the right time comes up.
Any thoughts would be great.
@Chance Cooper - congrats on the sale. I am a big believer in cutting losses, and in this case you have some cash to put to work. A couple questions:
What does your property reserves look like and what does your personal reserves look like? No need to give me exact numbers if you don't feel comfortable sharing. But after large inflows of cash, I first set aside any estimated taxes due on that lump sum. Then I top off my reserves and emergency fund. I would look at topping these off to appropriate levels then decide on how to spend the rest.
What does your financing look like on A, B & C? Rates, and term? Are they balloon notes? if so when are they due?
If you have only $127k to pay off loans, you could pay of 1&2 but not 2&3 unless you have other $ to use. Right?
Besides that, your ultimate goal would have to be considered.
Do you want to own/manage more properties? If so, then paying off 1-3 probably doesn't make sense.
If you've reached your limit and plan to go no further, find something else to do with the $127k. Buy notes, do private lending or joint ventures.
Many options are open to you.
Congrats on the windfall.
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