pay off owner finance sfh?

Question

So I brought a sfr for 90k owner fianance.
debt is down to 20k.
Market is too expensive now so most likely woukd not buy anything in the next few months. my question is should I pay this off if I can? or kerp the cash for reserve? rents is $975 will cashflow $ 600 month if I pay off debt.

John Underwood · Answer

If you were to payoff the house try and get a lower payoff.

Tell the owner you just came into 12k or 15k and would he take this lump sum to release the mortgage or would he rather receive payments for x amount of years.

If you have a really low interest rate it might make more sense to not pay it off early.

I have been loaning money at 12% and 2 points to rehabbers. So I wouldn't want to pay off a low interest loan.

Dan M. · Answer

I would do what makes you feel comfortable. If its paid off and you have alot of equity in it if you come into a situation where you need money you can always refinance. One of the things I do is consider by paying off the debt will that cash flow create more or less than if I took that amount and invested it. So say theoretically if its cash flowing at 400 now and you will gain an extra 200 by paying off the debt to get to your 600 cash flow total. If I can't invest that 20,000 and make 200 a month on it then I will pay down the debt. Hope this helps!

Ayne C. · Answer

@Enrique H.

You said you don't see yourself buying in the next few months.  I would first decide what cash reserves I'm comfortable having and then decide on any extra money.  Option 1 pay off loan and your cash flow increases by x.  How quickly can you now save the money you just paid down?

Option 2 invest in something else with better cashflow?  How likely is that?

Actually you never mentioned what your goals are.  Maybe you have a nice w2 and don't need cashflow?

pay off owner finance sfh?

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