How important is this ? (by Roy [AL]) Jan 20, 2021 9:16 AM
How important is this ? (by plenty [MO]) Jan 20, 2021 9:46 AM
How important is this ? (by Roy [AL]) Jan 20, 2021 10:07 AM
How important is this ? (by Bonanza [NC]) Jan 20, 2021 10:11 AM
How important is this ? (by myob [GA]) Jan 20, 2021 12:00 PM
How important is this ? (by S i d [MO]) Jan 20, 2021 12:12 PM
How important is this ? (by RB [MI]) Jan 20, 2021 12:32 PM
How important is this ? (by Roy [AL]) Jan 20, 2021 12:39 PM
How important is this ? (by Barb [MO]) Jan 20, 2021 1:12 PM
How important is this ? (by Ray-N-Pa [PA]) Jan 20, 2021 3:18 PM
How important is this ? (by Sisco [MO]) Jan 20, 2021 3:22 PM
How important is this ? (by Dee Ann [WI]) Jan 20, 2021 4:33 PM
How important is this ? (by myob [GA]) Jan 20, 2021 4:40 PM
How important is this ? (by MikeA [TX]) Jan 20, 2021 5:19 PM
How important is this ? (by 6x6 [TN]) Jan 20, 2021 6:54 PM
How important is this ? (by Robert,OntarioCanada [ON]) Jan 20, 2021 7:18 PM
How important is this ? (by Nicole [PA]) Jan 20, 2021 8:14 PM
How important is this ? (by Rick [IN]) Jan 21, 2021 8:03 AM
How important is this ? (by gevans [SC]) Jan 21, 2021 9:00 AM
How important is this ? (by Tony [NJ]) Jan 21, 2021 9:34 AM
How important is this ? (by Roy [AL]) Jan 22, 2021 10:13 AM
How important is this ? (by Roy [AL]) Jan 22, 2021 10:34 AM
How important is this ? (by Roy [AL]) Posted on: Jan 20, 2021 9:16 AM Message:
Lets assume you are over the age of 50 and you have realized that you are not going to live forever. In addition, you are still carrying a sizeable debt load from leveraged RE investments.
Question: How important is it to YOU that by a certain future age (age 65?) you would like all of your leveraged RE to paid off? If the answer is yes, then do you have debt pay-down plan to make this goal happen? If your answer is No, what is your reasoning?
There is no right or wrong answer here. Sid (MO) may think so,..but I want to know how you rationalize carrying 6 or 7 figures of RE debt for the long term.
--68.63.xxx.xxx |
How important is this ? (by plenty [MO]) Posted on: Jan 20, 2021 9:46 AM Message:
On leveraged properties i am redirecting a part of the rental income to the bank. So as long as I am physically capable of keeping it rented, maintenance and paying bills or mentally and financially capable of operating I'm fine with having the bank financing in near furture years. But yes the day is coming when i won't be capable. Then kids will get property, take over or sell. Nice to cut expenses at some point. I will be following this thread, interesting to ponder and prepare. Always good to give some thought to furture planning. --172.56.xx.xxx |
How important is this ? (by Roy [AL]) Posted on: Jan 20, 2021 10:07 AM Message:
1 year before my Dad died at 82, I asked him this same question. His answer,.."Son, I have 2 big insurance policies that I have paid premiums on for years. Upon my death, one policy will pay off my home mortgage and the other smaller policy will pay off my misc. CC debts. Sounded great at the time.
After my Dad's death, it came to my attention he had borrowed heavily against both insurance policies. There was not much money left to pay off anything and his surviving spouse had to declare bankruptcy within 6 months.
--68.63.xxx.xxx |
How important is this ? (by Bonanza [NC]) Posted on: Jan 20, 2021 10:11 AM Message:
to grow you need to be leveraged. It would be hard to succeed without using bank money (except for you super stars out there). So the question is how leveraged are you? 50% of net worth? what is your risk tolerance? 50% would keep me from sleeping at night. I'd say 20% or less at age 50 is comfortable. Might do more if you thought you'd be all paid off by 65.
I've been using a HELOC to buy so I just pay that down and go buy something else. I do have some mortgages (and currently trying to refi some of them) which will be paid off in 15 years. So ultimately my time table is 15 years to be totally debt free. I figure if I haven't made it by then then I won't. --71.217.xxx.xx |
How important is this ? (by myob [GA]) Posted on: Jan 20, 2021 12:00 PM Message:
At 51 I had 80+ rentals and realized my exit plan needed to change. Selling with owner financing was not working. (for way to many reasons) 80 was too many-- so we started at 51 yrs to consolidate until we got to that majic number. A number we could deal with on a daily basis and one that could be handled if the office was short handed or for having a LIFE.. That number was 63.
We sold and used the profits to pay off. We have 3 mort's left and I'm not rushing to pay them off.
The feeling of having to say I have 80 homes-- is the same feeling I have now when I say I have 60 homes free and clear.
To answer the bigger question: you are not going to live forever and when your in your 60's laying out a plan is too late. I compare it to checking the new tax laws after the tax year is over. --99.103.xxx.xxx |
How important is this ? (by S i d [MO]) Posted on: Jan 20, 2021 12:12 PM Message:
Roy, buddy.... you know what I'm going to say, but do you remember why I say it?
Financial Peace.
Now I will say this: I've slowed down my extra principle payoffs recently for several reasons.
1) C-19 moratoriums. Who knows when (if?) they will end? The rules and duration change by the day and none of them are trending toward "done".
2) Change in national political temperature. "You didn't build that," a former President told us. That is not too far away from, "You didn't pay for that rental property." With the D's in almost total control now, I see continued restrictions and takings from land lords.
I want to be debt free some day, truly and with all my heart, and I will continue working toward that. That said, I can certainly understand why investors are being more cautious concentrating large portions of their net worth in assets that the Govt can easily seize and/or tax into oblivion. That means I have to walk a fine line between the risks of debt and the risks of Govt. Slowing down payoffs was the last thing on my mind 4 years ago. Today? Yuck, what a mess! I'm keeping flush cash reserves so I can react quickly and survive for the long-haul.
Do what you think is best, my friend.
--107.216.xxx.xxx |
How important is this ? (by RB [MI]) Posted on: Jan 20, 2021 12:32 PM Message:
"You can go your own way". --199.192.xxx.xxx |
How important is this ? (by Roy [AL]) Posted on: Jan 20, 2021 12:39 PM Message:
Sid,
My 10 year goal was to be debt free by age 65 and that is just 2.5 years away.
If I achieve my debt free goal, I can then save $3-4K a month that would normally go to debt service. I do not want to leave this world the way my Dad did. What goes on in D.C. does not concern me. Plus, once everyone gets the vaccine, things will get back to normal. --68.63.xxx.xxx |
How important is this ? (by Barb [MO]) Posted on: Jan 20, 2021 1:12 PM Message:
I'm going to say, "It Depends"
If I have a class C or older unit that needs more regular maintenance, I'd say yes, payoff is more important.
I'm going to be tearing down another couple of those before too long and doing new builds in their place. Yes, it will mean more debt, but it also means A LOT more rent, and it is easier to rent them. My target market has gotten more choosy. The significantly higher rent is paying the new construction off faster. --67.43.xxx.xxx |
How important is this ? (by Ray-N-Pa [PA]) Posted on: Jan 20, 2021 3:18 PM Message:
If the property is placed in the trust, you are allowed to die and the debt isn't called due.
A successor beneficiary should be be appointed and named in advance. Using this structure, you can fund your kids, grandkids and even great grand kids life. Even if they are not of age to accept money a trust provides you the tools to avoid costly probate.
--24.101.xxx.xx |
How important is this ? (by Sisco [MO]) Posted on: Jan 20, 2021 3:22 PM Message:
Debt free, with enough cash reserves to handle whatever expenses come your way, A viable plan to hire out the management of your houses if you can't or can't make yourself do it. Otherwise, being debt free only to need to go back into debt for capex isn't so different from being indebted.
Barb raises a good point, the houses need to be easy to rent, low maintenance, with low hassle tenants or it isn't a good fit for hands off operations. If low hassle isn't likely with your operation, SELL before a life event forces the issue.
A goal is important, but if it takes an extra year to reach your goal, so be it. I would think that the goal is largely reached by ceasing to take on new debt....no more adding to the herd, you can cull and buy back though, and we probably should always looking to better manage through culling and buying back. --67.43.xxx.xxx |
How important is this ? (by Dee Ann [WI]) Posted on: Jan 20, 2021 4:33 PM Message:
I'm working toward debt free, multiple streams of income, assets protected.
If living beyond that, plans for comfortable later in life pursuits and thoughtful disposal of assets if there are any by then. --75.11.xx.xx |
How important is this ? (by myob [GA]) Posted on: Jan 20, 2021 4:40 PM Message:
A good point made-- one we addressed in 2001. Once the property's were getting paid off-- that's when we needed a will and trust set up.
When you have debt no one wants to INHERITE that-- once there free and clear-- your a target.
We hired a planning atty. Set up limited partnership and trust along with Corp. All property's are in the trust.
This was not cheap to do but not something we could do alone. We had our accountant sit in on the planning since she knew our business from year 2. --99.103.xxx.xxx |
How important is this ? (by MikeA [TX]) Posted on: Jan 20, 2021 5:19 PM Message:
My plan has always been to be free and clear well before 65 for several reasons.
First, as you get older I believe your risk tolerance should go down. The time for fast growth at high risk is over, the time to protect that wealth to provide your desired lifestyle for the remainder should kick in.
At least for me, there is an aspect of concern for the ability to manage it well. I've seen too many older folks get overwhelmed with their mental and decision making ability as they get older. It could be brought on by a medical condition or just the nature of getting older.
Lastly, I have spent a life building, it's time to enjoy it. I want as little effort as possible. Anything I can do to put the working side of life on cruise control I'm all about. Dealing with mortgages is just one more piece of work that can go away. --64.130.xx.xxx |
How important is this ? (by 6x6 [TN]) Posted on: Jan 20, 2021 6:54 PM Message:
How important is this ? (by Robert,OntarioCanada [ON]) Posted on: Jan 20, 2021 7:18 PM Message:
I agree that reducing debt is important while at the same time keeping rental houses in a good state of repair. Seen many times owners not doing anything to rental properties then taking a big hit when they sell. Suppose in the future a house is sold one at time where want to get maximum price for each house. A well maintained property sells easily along with most want a house in move in condition where nothing has to be done. So in the end it is doing two things diametrically opposed. One cut costs along with paying off mortgage. If did not shop at a few different Habitat for Humanity restores would have moved very quickly into a negative cash flow position. Been through difficult times with the first recession along with they reduce the annual allowed rent increases under rent control where every year the operating costs went up more then allowed rent increases. Look at renovations or repairs along with how that can be done to cost less without effecting quality. --99.236.xxx.xxx |
How important is this ? (by Nicole [PA]) Posted on: Jan 20, 2021 8:14 PM Message:
I think the question is what do you plan on doing with the properties when you are really old (whatever that means) and then again when you die.
If the properties are going to be sold (either when you no longer can manage them or when the brown side of the grass is calling to you), who cares if they are paid off ahead of time.
If you want to leave them specifically to someone who is going to keep them, are they able to obtain financing or will you leave them enough cash to pay the properties off if they can't get their own mortgage? --72.70.xxx.xxx |
How important is this ? (by Rick [IN]) Posted on: Jan 21, 2021 8:03 AM Message:
Get out of debt now as fast as you can and as well as you are able. Sid(MO) has made some excellent points. --50.229.xx.xxx |
How important is this ? (by gevans [SC]) Posted on: Jan 21, 2021 9:00 AM Message:
I retired at 58 and was debt free at 59. but then I found another deal...
Currently approaching 65 and debt free again. We live on the rents, with a big 401k to back us up when we get too old. Our goal is to simplify. get rid of the troublemakers and possibly add easier income.
Being debt free really helps with big income swings. this week we lost several of our most profitable tenants due to a change in military regulations. It's complicated, but they lost the option of staying off base. --69.80.xx.xx |
How important is this ? (by Tony [NJ]) Posted on: Jan 21, 2021 9:34 AM Message:
If history is any indication, you can almost certainly count on capital gains taxes being less attractive when a D pres follows a R pres.
Ask anyone who tracked this in the '80s and early 2,000s.
That plus the softening of property values that follows - makes the argument to sell now - to capture and retain equity.
For the couple of readers here that might wig-out over my thoughts, try to understand that the history and data - not name calling - supports my thinking.
I should have sold out in 1988 and again in 2006. This time all or most of my portfolio will be sold this year.
Again if history is any indicator, values will likely drop 30% or more in the next 4 - 6 years. --73.215.xxx.xx |
How important is this ? (by Roy [AL]) Posted on: Jan 22, 2021 10:13 AM Message:
Thanks Tony (NJ) for the history lesson. History always repeats itself. Hindsight is always 20/20. --68.63.xxx.xxx |
How important is this ? (by Roy [AL]) Posted on: Jan 22, 2021 10:34 AM Message:
Gevans,
I quit working for the 'man' about 35 years ago and I am about the same age as you. I have been self-employed most of my adult life. I usually got fired when I worked as an employee. My last employer told me he was doing me a favor by firing me since I am not a 'team player'. He was correct too.
RE has been the most lucrative business of all my past self-employed endeavors. I just wish I had started in this business at age 21 instead of 47. If I had, I could have retired at age 40. --68.63.xxx.xxx |
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