Our first mortgage payment is coming up next week on our first rental property. We've already got a renter in there paying $800 a month, our total mortgage payment including PIE is $392 minimum ($52k for 30yrs at 3.75). I know there is a strong argument to take the savings and invest into index funds but we'd like to pay extra toward the principal. I ran through a mortgage calculator and found if we pay an extra ~$258 per month, we'll be on track to pay off the loan in 10.5 years, saving $23,650 in interest payments over the life of the loan. That will leave us a cushion of $150 per month ($800 in rent minus $650 total payment to bank) to put into the savings account for the home to cover taxes and repairs.
Does that sound like too little, too much, or just about right in monthly cushion ($1,800 annually)? My wife and I have a combined total take home pay from our regular jobs around $90k pre-tax annually and we do not have the rental in a separate LLC.
We opened a new checking account specifically for this rental so any transaction that's related to the home (rent in, mortgage out, repairs, taxes, etc) will come from that account. My thought is that we'll limit the savings cushion in that account to around $2,000 and if at anytime it grows much beyond that, we'll withdraw the extra and either put it toward the rental as additional principal or perhaps invest it into index funds.