Why it seem I can pay off most mortgage in less than 10 yr?

8 Replies

It seems to good to be true. My math must be wrong. Please let me know what I'm missing. Basically let's assume no depreciation and not exceeding $300-$400/month maintenance budget to much.

House price $750k for 3 family with 2-3 br on each floor in area with $2500-$3200/mo rent. OK:

$30k down

$720k financed

$4500/mo Mortgage with tax, insurance and PMI

$8500 Rental income + $1000 (additional payments to principal)

7 years (Time to make 85 payments of 8500 which equal the financed amount)

What am I missing? 8500/mo for 7 years is $720k-ish. No need for 30 years to pay this off right? Am I mistaken? I've done the math on several properties and get same results.

Tenant's paying water bill and utilities ? Are you going to use a property management if not may still want to put that in with your numbers .cause later down the road you may not want to be taking care of that or don't have time ? Also vacanties and lawn care 

1) don’t know where you can get a 4% down non-owner occupied loan

2) $3,000/mo to live in a triplex SEEMS high. 

3) at 4% interest to pay off $720k in 7 years the payment is $9,841.52 PLUS taxes/insurance/pmi

So yes. You’re math is off somewhere. Maybe you forgot interest? But problem 1 seems even bigger. 

Thanks for feedback i think i did not understand how interest works. I found early payoff calculators. Seems my model requires:

2 payments per month for half mortgage

double my extra payments so $3k/mo extra

Takes 10.5 years  then

Low down payment is also a fatal flaw. Id need  a MASSIVE downpayment to get it OR id have to pay $2500 + $3000 a month if i lived there.

In addition to the multitude of other issues, you are also making the (terrible) assumption that you will not need to put any money into the property the whole time you own it. Not how real life works, roofs need repairs, furnaces break. Also, if you have to evict someone there's more money you need on hand, plus no income for that unit for several months. Cant pay a lawyer or contractor with the equity in your house.

This also doesn't take into account the multitude of theories on whether or not its even a good idea to pay down the mortgage. I think you should back up and do a little more research before you dive into something and end up in over your head.

@Orlando Goodon

I too hate owing “people” money but if the interest rate is low enough it really can be considered free money. If you’re willing to live there for a year get an owner occupied loan (lower interest and origination charges.), apply for a 15 year loan (lower interest rate) and then after a year you can move out and get a 3rd renter. 

If inflation is 2+%, then you can pay 3% interest, subtract the tax savings, and you’re close to break even. 

Originally posted by @Bill Brandt :

@Orlando Goodon

I too hate owing “people” money but if the interest rate is low enough it really can be considered free money. If you’re willing to live there for a year get an owner occupied loan (lower interest and origination charges.), apply for a 15 year loan (lower interest rate) and then after a year you can move out and get a 3rd renter. 

If inflation is 2+%, then you can pay 3% interest, subtract the tax savings, and you’re close to break even. 

How does the tax savings work? Are there any calculators for that, that you recommend? I tried 

https://www.bankrate.com/calculators/mortgages/loan-tax-deduction-calculator.aspx

and it say $12k is first year tax savings on 750k house. Does that mean I get at least a $12k refund?

Also at near 50, I don't like the idea of a loan I'll die paying. LOL

 

I hear that. I’ll be 52 in a couple months. You see 2045 on a loan payoff date and you don’t think it’s a real date. Like when I saw kids with high school letter jackets saying 00 or 01. 

Originally posted by @Andrew B. :

In addition to the multitude of other issues, you are also making the (terrible) assumption that you will not need to put any money into the property the whole time you own it. Not how real life works, roofs need repairs, furnaces break. Also, if you have to evict someone there's more money you need on hand, plus no income for that unit for several months. Cant pay a lawyer or contractor with the equity in your house.

This also doesn't take into account the multitude of theories on whether or not its even a good idea to pay down the mortgage. I think you should back up and do a little more research before you dive into something and end up in over your head.


Thanks for feedback. I'm in NJ market too. I'm saving $300+/mo for maintenance. $3600/year. I can easily double that number if I have too in an emergency. $8k is the number where I'd  start to get nervous. Also, a lot of my strategy will rely heavily on getting and exceptional inspector AND not rushing into the wrong house.

I've never seen long vacancies. Where I live, I'll see a new tenant within 2-3 weeks when somebody leaves. Not enough places available. BTW, that 2-3 weeks is for a nice place with 1.5 stars....