See spreadsheet
I would love to get this group’s advice on setting up a real estate debt snowball for my portfolio. I’m at the point where I don’t want to purchase any additional properties, but I’m still a couple of years away from retirement so my W2 income can cover our bills. Fortunately, my real estate portfolio is throwing off some fairly nice cash flow ($7k-$8k/month). I could put it in the stock market, but I really don’t want to increase my stock exposure right now. So I thought about a debt snowball, but not sure how to set the right prioritization criteria. The fundamental trade-off is duration vs interest rate. I have a few loans with long-term durations (20-yr to 30-yr terms), but many with short-term durations (5 years). The rates are actually pretty good ranging from 3.5% to 5.5%. It seems crazy to pay off 3.5% money though. I also have a line of credit that cuts across several properties. It could make sense to pay that off because the payment will decrease, but again that is 4.168% money.
All the properties I want to keep long term and are performing well. Properties #1-#3 and #27 are my appreciation plays which means it is only break even cash flow. The rest of the properties cash flow quite nicely. I could pay off those properties, but each one of them have 20-yr fixed rate loans.
I’m also a little concerned that when I retire in a couple of years, it may be difficult to refi the 5-yr loans. My income would be around $150k/year and I should have $3m in liquid assets.
I did calculate a faux “cash-on-cash” return calculation in the spreadsheet. This basically takes the annual mortgage payment and divides by the mortgage balance. The thinking is if I deploy $x funds to payoff the loan balance I get $y amount in additional “cash flow”.
Anyway, any advice would be appreciated. Thx
Submitted September 18, 2020 at 09:30PM by ESI192 https://ift.tt/3kw0ADn
