All Forum Posts by: Zach Rubin

@Zach Rubin

I’m not sure why you believe the interest rate on investment property 2 years from now will be as good or better than the rate you have on a primary residence today. Am I reading your post correctly?

Secondly, at your stage in life, it may also depend on whether you are counting the income from this rental in your household operating income. If not, you may be better served NOT to prepay for the reasons others have mentioned - the renter pays your mortgage, so the cost of funds is not yours to bear, and the cash in your hand can be deployed where it does you the most good.

I hated the idea of being in debt and it kept me from starting my investment real estate journey for a long time. Now that I’ve embraced that the debt is part of the overhead of having the business, it is much less of a pain point.

Best of luck with whatever you decide.

 Are you worried about the math of it, the peace of it, or the behavioral aspect of it?

If it's strictly math, and you can be disciplined to carry cash against your debt notes almost to a 1:1 tier, then sure try it. If you can't, then behavior wise you're not capable of it clearly. 

Don't get fooled with people trading interest rates against others, oh my mortgage is 3.5% but my savings is giving me 4.5%. Anyone that has that justification, ask them to show you the last 10 years of their ability to manage payments and their exercises of financial behavior during times of liquidity. You'll realize they'll always have some excuse to justify their irresponsible actions. Lack of accountability.

That location is an underrated primo, primo spot. 

If you intend to have a family, not my business, I'd keep that as my primary and have my kids go to school in that area. Pay it off as fast as I can for peace of mind, then worry about investments. I'm not saying this as someone preaching, like one's who "trade" IR rates, I've done this myself and the lack of debt, peace of mind changes your day to day lifestyle. 

A regular Dave Ramsey out here. Proud of you man. It's a good question and worth talking through in these forums. A ton of great input on this question. For my wife and I we made the emotional decision to not carry any debt over our heads (literally). We paid off our personal residence. But use leverage rentals. Indianapolis is too good of a market to not take advantage. That said, we start safe and will gradually extend leverage as our personal portfolio grows...again, I know the math works and help investors all day long; but at the end of the day it's YOM (your own money) and therefore must be measured against your or risk-meter, to use Ramsey's words.  

If this is truly going to be a rental property in the future, then it's a waste of money to make extra payments. On a primary, your income is responsible for all the mortgage payments, so those extra payments will save you interest. However, on a rental, you are NOT the source of funds for the mortgage payments,...your tenant's rent is. The only cost to a REI is the cash that comes out of their pocket. Making extra payments is just adding to your cost. Your tenant is already paying for it. This means those mortgage payments are free to you..so don't help your tenant out.

I purchased this way and it was an excellent way to get some repairs done and have one mortgage closing. Repairs cannot be more than 35K with FHA. You will put in your offer and get a quote from a contractor to complete the work. You can get. loan for updating furnaces, painting, pretty much anything that will improve the home. You could not for instance get a swimming pool or anything like that. They underwrite it as one loan and when you close the work can start. You will have to find a lender in your area that offers these types of mortgages. Word of warning. All FHA lenders are not created equal so look around and make sure you are dealing with a lender that can do what you require. Best of luck. It's a great program.