Opinions from the Hive Mind please?

Quadplex with remaining 10 years/90K loan at 5.78 percent.

Payment is about $1600.

Payment is now split about $1100 to principal and $500 to interest.

Pay it off? Can't find anything else to buy - we've looked! And certainly, $90k isn't going to buy anything anymore anyway. We've found ONE place, it's $300k for two units - a mobile with a garage apartment. Rents about $1500 each. I'd offer $200k which he won't take as he HAS fixed up the places.

That's what I think too Jim...it would be like buying a house for $90k/$1600 rent in my opinion.

DH wants to continue buying but he admits we can't find anything and we are NOT 40 or 50 or even 60 anymore. If we find a place it will most likely need a LOT of work and we aren't interested in that anymore.

Others love paid off places. Me, not so much.

5.78 interest rate isn't so bad -- if it's fixed.

If you have plenty of money in the bank, pay half of it off. Save the other half for investments that may come up as the country is in recession and prices are likely to drop in the next 18 months. If you have lots of money in the bank, just pay it off.

As the recession deepens there is the possibility that money may be harder to borrow and also be at higher interest.

Unless you have an alternative investment where $90K will provide $1600/month cash flow, pay it off. IMO it's a no-brainer.

Pay it off. If you decide you want / need cash for something else, any bank will slap a HELOC on it for you without even an appraisal in most cases as long as you don't ask for some ridiculous amount. You can have the money in a few days.

Paying off interest bearing notes is earning the interest in additional profits. The only time it makes sense to let debt ride is when inflation is way higher than the interest rate, since you gain free equity equal to the spread between what the interest costs you vs. what inflation eats away. Right now, inflation is around 4%, so you're not gaining anything by letting a 5.78% note ride.

RZTim, original loan was $368k ($460k 20% down.) $10k back at closing for a new roof. Interest only for 10 years, then converted to fixed for final twenty years.

Logic would say that if you are making less than 5.78% on your money sitting in the bank then you should pay it off. I haven't heard any economist say there is going to be a huge change that would drop prices substantially so while you may find a deal here or there, you likely aren't going to find many that would eat up significant cash. It will take about 4 1/2 years of socking the $1600/month away to replenish the $90K cash. So the snowball will gain momentum. The only other option might be to sink it into building out the ADU's if they will give you a higher return on the money.

Lots of other factors to consider as we get older as well. I'm at a point where I'm selling off to my son little by little. I had a mentor when I first started out who kept his longer than he was mentally (and physically) able and it cost his estate what would be a couple of million in today's dollars. That was a hefty price the last 3-4 years of his life. I'm not going to make that mistake.

WMH, the problem I see is not where the estate goes (although that is important). The problem is when our mental faculties fail while we are still in control of the day to day. I saw this guy make some really bad decisions. Tenants not paying and not being evicted, houses sitting vacant for months, the city putting liens against them for cleanup, contractors taking advantage of him, mortgages not being paid (to the point he lost a couple of properties), unrepaired roof leaks destroying properties, and the black sheeps of the family stealing cash. I tried to reason with him and get him to turn it over to a management company but he was very hard headed about his business. That's what made him so successful but was a detriment late in life.

WMH, that makes sense. I still say pay it off. Increase your cash flow by $1600/mo.

Ed, it did re-amortize based on the balance when it adjusted from an interest-only to a fixed, amortized loan. Fixed interest rate for the life of the loan (30 years.) 10 years of interest only - you can pay just the interest or whatever amount you want as long as it's more than the interest due. We paid it down aggressively.

The payment changes and locks in based on the amount due on the date it flips to a regular 20-year loan.

W,

Me? Debt free is a great place to be.

$1600 per month additional income is as good or better than buying another property. I say better because it’s additional income without another moving part to manage.

$90k / $1600 = 4.6 year payback. Good investment. And a lot of interest money saved. Double good!

In my area “buying” a prop for $90 that yields $1600 after expense is a great deal.

I really like generous cash flow not having the pressure to maximize and collect rents to help pay the bankers’ Mercedes lease.

I also like the idea of a cleaner business to pass along.

At my stage (and yours I believe) I want simplicity and ease. When I shifted my focus from number of units to cash flow and profit my stress level went way down. I work on making what I already own give me more.

W,

Me? Debt free is a great place to be.

$1600 per month additional income is as good or better than buying another property. I say better because it’s additional income without another moving part to manage.

$90k / $1600 = 4.6 year payback. Good investment. And a lot of interest money saved. Double good!

In my area “buying” a prop for $90 that yields $1600 after expense is a great deal.

I really like generous cash flow not having the pressure to maximize and collect rents to help pay the bankers’ Mercedes lease.

I also like the idea of a cleaner business to pass along.

At my stage (and yours I believe) I want simplicity and ease. When I shifted my focus from number of units to cash flow and profit my stress level went way down. I work on making what I already own give me more.

I fund myself paying Uncle Joe over $90,000 last year. Why so much? too many places paid off and not enough subsidizing of the banks.

So how close are you to jumping into yet another tax bracket?

Where cash flow is wonderful, if you are finding yourself hooking up Uncle Sam too much already, then understand that you asking to pay them even more. Your rate is good.

I always paid them off so I got move them into an S Corp free n'clear. That was my self cooked liability insurance. Divide and conquer.

Ever heard of a thing called "Asset Protection"?

I had a house with a partner. Partner died and gave their share to a grown up married child. He took the property out of his parents trust and put it into HIS NAME. Somehow the title company put my share into my name, killing off my title held in my Family Trust.

I vote to keep your powder dry. Maybe nothing to buy now but that may change in a couple of years. You'll be well positioned to buy with cash and not have to jump through hoops or expense of financing.

You can probably find a CD for close to that mortgage rate.

Right WMH, not lookin to buy or renovate houses anymore either.

After graduating from college my niece called me for some investment advice. She and husband had the opportunity to buy 3 townhouses next to one another in their town. She gave me all the details and something didn't sound/feel right about the situation, which I told her. "It's not a side hustle, more than that, it takes over your life."

WMH,

Congratulations on your successful real estate business!

Pay it off today!

If you decide you made a mistake by paying the mortgage off, go get another mortgage.

Debt free is a great place to be.

Debt free provides a cleaner estate. Your kids will appreciate the paid for real estate more than real estate that is mortgaged.

You cannot put a price on the piece of mind you will get when you are debt free.

I am 68 and would not want the pressure of a mortgage - even if it was a small percentage of our net worth. We have 20+ properties (class A, B, and C).

Good luck!

Can you get a CD that pays more than you are paying in interest? If not, pay it off. If so? Buy the CD.

I have a couple that I owe about $25-$30K on. Original pan was to pay one off in 2023, one in 2024. Well, I have them financed at 4.25%, and the local bank offers 15 month CDs at 5.5% interest. So I put my payoff in a CD.

I’ll buy another in a couple of months with another payoff amount, so long as the CD is paying more than I’m paying in interest.