Author Topic: Should I pay off the rental?  (Read 1518 times)

Sparbuch

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Should I pay off the rental?
« on: September 30, 2013, 04:27:40 PM »
I run a successful small business where the ROI for money invested there is substantially larger than what I can get via normal methods (stocks, real estate, etc.).  However, I don't like to have my eggs all in one basket (my business), so I try and behave as if I'm just an employee of the business, and that the business value will be pure gravy, if it were ever to be sold.

Some quick numbers:

Take-home pay: $24,845/mo
Monthly savings: $13,200

Stock portfolio (401ks, IRAs, brokerages, etc.): $465,000
Cash: $50,000
Personal Residence: $450,000
Rental: $328,000

Mortgage on the rental: ($230,000)

I don't have any other debts.

The business has some excess cash, where I could pay off the mortgage (at 3 5/8%) and enjoy the ~$1695 in net monthly cash flow, while not subjecting the business to any cash flow risk there.

So...do I pay off the rental? Or should I be looking to purchase another rental and enjoy the unbelievably low interest rate?

daverobev

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Re: Should I pay off the rental?
« Reply #1 on: September 30, 2013, 04:54:10 PM »
Three and five eighths? Tax deductible? Fixed? No, no, and no - invest it elsewhere (diversify). Cashflow is great - when you need it. But it sounds like you don't.

Sell it because it's hassle and you'd *rather not* bother with it? Sure.

Buy another? Sure, why not? If it makes you money... But do you need to?

To be honest, if you've already got enough cash elsewhere to always protect you in a crash, invest where you like - if you think/know you can make more money from putting spare cash into the business, do it. What's to lose?

Numbers Man

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Re: Should I pay off the rental?
« Reply #2 on: September 30, 2013, 05:05:26 PM »
Since your rental interest expense is tax deductible, don't pay off the rental. Make sure that your business has the proper insurance and you are maxing out your retirement accounts. I would invest in the stock market because it is a lot more liquid than a piece of real estate.