All Forum Posts by: Ericka G.

@Jim D. Thanks for the input - agree that a hybrid approach might make sense since the rate is still pretty low for the next year...that said, even if I were to keep the mortgage just one more year at 5.125%, I'd be paying close to $6k in interest in the first year.  

If I pay the mortgage off and put that same monthly payment into an investment account - i'll essentially make whatever interest the market yields PLUS the 5.125% I would have been paying on that money if it stayed in the mortgage.  Maybe I'm looking at it wrong, but it seems like as long as I do better than negative 5.125% in the market I'd come out ahead by getting rid of the mortgage interest payment (on cash I no longer need to borrow)?  The more I think about this, the more I wonder why anyone would keep a mortgage on their primary a second longer than needed.

For investment properties, the tenants are paying the mortgage and interest, so it makes sense to use leverage responsibly there...but for the primary, the argument seems a bit less clear.

@Kelli P.  I LOVE Detroit metro as an out of state investor, but I agree with others who have suggested suburban Detroit as a better starting point.  I'm a fan of the burbs just outside of Detroit.  Have purchased 4 units in 2 different burbs and have never once regretted the decision - those properties helped me gain financial freedom. They have cash flowed (2% rule +) and appreciated (average of 73% since 2014).  There are still deals to be found in those markets, too.

You have all the benefits of Detroit - large metro, restaurants, stores, major airport hub, but without the risks of crime and city dysfunction.  IMHO, the city of Detroit is NOT for newbies or people out of state.  I've lived in some rough areas (including Harlem and Brooklyn pre-gentrification) and parts of Detroit scare the crap out of me - literally terrifying.  I know things are getting better and there are some great areas, but those nicer areas are also expensive now.

Find a good investor-friendly realtor and do a canvas of some close-in suburbs and some in-town areas and then trust your gut and the numbers.  Then, before you pull the trigger, post some dummy ads to see what types of tenants you will get.  This is another big thing for MI - property has been so cheap than anyone with decent credit and a job will generally buy, so I found the tenant quality quite poor overall.  I focused on burbs near the airport and rent exclusively to pilots, flight attendants, and airline personnel to counter this.

Lastly, when running your numbers, be sure to get your own quotes for insurance and taxes to include in your analysis.  Sadly, the entire state of MI is discriminated against by the insurance industry so I found it hard to find insurance at first and then was shocked by the prices.  Call with the specific addresses and get quotes so you know what you're dealing with.  Taxes vary widely from city to city in metro Detroit.  Also, if you decide to go the suburb route check the reviews of each city's rental laws and bldg inspection department.  I stopped buying in one burb that I had great success with because the bldg inspectors are such asses it isn't worth the trouble to add anything in the area.  Good luck with it!

@Dave Skow this makes a lot of sense too...the rate might end up being a bit less than 5.125% since LIBOR has been going down lately.  Called bank yesterday and they said the new rate will lock on the day my loan is actually due to adjust in May, or something like that. I'll see where the rate lands and make a final decision I guess.

@Craig Jeppesen this is really resonating with me...I'm leaning in this direction. Thanks for the input. I NEVER thought I'd be someone to pay off my mortgage early when loans were so cheap, but looking at the overall market situation, my personal situation, and the amount I'd save on interest, it seems like the best move right now. The last thing I need to figure out is if opening a HELOC will negatively impact my credit vs. keeping the mortgage.

@Eric Schultz I hear you.  I've had folks on BP telling me that owning a property outright is silly for years, but, I personally like a mix of leverage and full ownership...I use leverage when it makes sense, but in this case, since I have ample cash reserves (so paying this off won't impact my ability to invest in other deals or have an emergency cushion), the $30k in interest and $6k in closing costs to refi makes leverage more of a liability than it seems to be worth.  Also, due to rising rates, I'd be paying all this money to refi and then also have a slightly higher monthly payment :(  For me, it comes back to the question - why pay interest on money I don't need to borrow?  Why not flip things and be the one earning interest (I'll invest my monthly payment instead) now that interest rates are higher?

@Shaun Weekes I took your advice in the spirit that it was given (and I'm guessing that others read it that way too) and greatly appreciated your input.   Always excited hearing about different investment vehicles and have been researching all of the tips suggested here.

@Caleb Heimsoth Interesting POV. Do you mean what it would rent for if I moved out and turned it back into a rental? I think the going rate would be $2,000-$2,400. You're right, way less than $3k. You're also right that my HOA fees will eventually go up...the tricky thing is that if I were to sell/move right now, I'd be paying way more than the $820 + HOA I pay here for something comparable in an equally desirable area.

I'd still need a place to live and could see myself staying here another several years at this point.  Prices in Atlanta have gone crazy lately.  I'm still trying to figure out what to do with the cash from my last property sale...I just haven't found any deals that work for me lately.

@Larry Turowski great advice.  I will definitely look into this approach.  I'm not very familiar with HELOCs but clearly they are worth some exploration since there are no closing costs and no interest unless I need to use the funds. thanks for chiming in!

@Will C. Yes, I hear you on having a lot of money tied up in the property...I never thought I'd consider this approach, but when I run the numbers, paying it off does make a lot of sense. I'm looking into the HELOC to add as a just in case, as you mentioned...good to get it while I have my W2 because I never know what will happen with that (job security just doesn't exist anymore)

I haven't ever considered being a HML but did look at the crowd funding sites a while back - might be worth another look. So many options to explore - thanks for the input!

@Joe Splitrock all true.  Thanks. I WISH i could find another deal I'm excited about, but so far lately, no luck.  

@Joe Splitrock thanks for the input. I definitely will do extensive research before jumping into annuities - index funds feel like a better move for my life stage but I’m still digging.

Per your advice, I’ve been stacking cash and looking for additional investment properties but honestly haven’t found any deals that pass my criteria in the last 1-2 years. My portfolio covers my expenses and keeps me pretty busy self managing so I’m not rushing to add anything unless it is a gem.

Given that my current portfolio cash flow already covers my living expenses and then some, do you still recommend refinancing?

I’d have ample reserves left (12-24 mos emergency fund plus investment accounts that could be tapped if I see a deal) after paying off the loan. The $30k in interest over next 5 years and $6k in closing costs are the things that make me question the refi. That’s a lot of cash to pay to borrow money I really don’t need to borrow?