All Forum Posts by: Lucas S.

Depending on how your bank applies payments and calculates interest it might help a tiny bit (Write offs are very overrated by the way). It would be far more beneficial just to pay down extra on the principal if increasing your equity and security are your main goals.

By the way, many other countries do a combined morgage/checking account deal where they compound interest daily based on your total balance outstanding. That approach is much better as it keeps more of you money earning a decent return. It is a shame that I havn't seen anyone offering anything like that in the US.

All banks should do this, but not all do. I had a loan with a major bank and if I made a larger than required payment they did put the extra to principal by default. However if I made an extra payment (more than one payment a month) they defaulted it to be the next payment due (interest/principal) rather than just principal. Wasn't a big deal as i could just specify principal only with the payment, but the point is that they didn't default to that.

Just check with your bank on how to make sure it is designated correctly.

I would believe the principal would go down from Feb to March if the monthly payments are identical (less days in Feb = less compounded interest so more principal in Feb). However to see a lot of jumping around during the year seems fishy. How much jump in interest are we talking about here? You didn't list loan amount so I couldn't calculate would I would have expected.

Thanks for sharing. I have similar stories with my parents and in-laws who are "fearfull" of investing and would rather sit on CD earning almost nothing and guarentee themselves real losses due to inflation. In-laws could have easily retired by now if they had invested in almost anything as they have good personal cash flow management.

BP is a great place to learn and improve the income side of the house. There are also tons of blogs following people who are getting out of debt, maximizing efficiency in their life, and building cash flow (by minimizing expenses). My personally favorites are Mr. Money Mustache (MMM) http://www.mrmoneymustache.com/ and Early Retirement Extreme (ERE) http://earlyretirementextreme.com/. Admittedly they are pretty hard core, but so am I, and looks like you are looking for answers. Check out some of the user stories on MMM as a good starting place.

If you are looking for ways to get out of debt sooner and build investment cash check out Mr. Money Mustache at http://www.mrmoneymustache.com/ or some of the other many blogs on the topic. Mr. MMM and Jacob at ERE http://earlyretirementextreme.com/ (note Jacob has sort of stoped posting many new posts, but there are tons of old ones to read) are my favorites. They will definitly get you to think through your goals and motivations as well.

Sounds like it might not be the time to buy for you. I am in a similar situation just outside of DC. I have a paid off townhouse that i bought near the bottom that I am living in, but everything has gone back up 35% or so anywhere near us (while rents have gone up maybe 5%). So the pricing is out of whack using the 2% or 50% rules. I have a good amount of cash and high personal cash flow and could definitly purchase something (duplex/SFH/etc) and pay it off within 3-5 years so i would be fine, but my ROI would only be in the 5-7% range which i can easily beat on the stock market or doing lending through lendingClub/prosper which both would require lots less work.

REI is still definitly appealing, but if you don't have a car and don't want to get one (extra expense) and drive to work from it (extra expense) it might make sence to either just look into a personal residence or simply take a couple more years in building your liquid investments in preparation for a better deal down the road (I have to think that NYC is still over priced, but I have thought that about DC for a while now too). If you are set on REI, maybe consider transactional investing (Rehabing, etc. . ) vs buy and hold as there might still be money to be found there.

Welcome!

Just a quick thought - have you seen all the sellers financials as well? I know this has been frustraiting, but it might be a blessing in disguise unless you have a very good idea on how to fix the cash flow issues for the business.

On the property side:

Not an expert by any means, but typically repairs are generally directly deductable in the year you make them (if you convert to rental part way through the year you might only get partial credit). Where as improvments get added to the cost basis which is used to calculated the "depreciation" you must claim on the property each year (that offsets income) and gets used to calculated capital gains when you sell the property.

Start here on the IRS page for more info:
http://www.irs.gov/taxtopics/tc414.html