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Message
Selling house, what to do with equity
Posted on 8/12/19 at 6:02 am
Posted on 8/12/19 at 6:02 am
Selling a property this week and will be getting a nice chunk of change back. Would you put the money in the market(MSSB invests for me), pay down another mortgage, put some of the cash in a 2% yield savings account?
I will have two mortgages after the sale of this house, one on my current home at 2.85% for 15 years and one on a rental property at 5% for 30 years. I could pay off the rental property but don’t necessarily want to tie up that much cash. I plan on talking to my CPA today to see how he goes about writing off the interest I pay for the rental property on my taxes because I’m sure the effective rate I’m paying is less than 5%. Not sure if that has changed though with the new tax laws.
Any advice would be appreciated. Don’t necessarily have anything that I want to do with it and not looking to buy a second rental at this time.
I will have two mortgages after the sale of this house, one on my current home at 2.85% for 15 years and one on a rental property at 5% for 30 years. I could pay off the rental property but don’t necessarily want to tie up that much cash. I plan on talking to my CPA today to see how he goes about writing off the interest I pay for the rental property on my taxes because I’m sure the effective rate I’m paying is less than 5%. Not sure if that has changed though with the new tax laws.
Any advice would be appreciated. Don’t necessarily have anything that I want to do with it and not looking to buy a second rental at this time.
5
Posted on 8/12/19 at 6:47 am to TitleistProV1X
quote:
because I’m sure the effective rate I’m paying is less than 5%.
Posted on 8/12/19 at 7:22 am to TitleistProV1X
Does your rental property mortgage have a recast or reamortization option on it? If so, I would dump the cash in that and then recast it to lower the monthly payment.
Posted on 8/12/19 at 7:29 am to notsince98
Not sure, just did a conventional 30 year mortgage. Am about 5 years in on the loan. I put an extra $700 per month towards my principal so not sure how long I truly have left but I could look into that.
Posted on 8/12/19 at 7:29 am to TitleistProV1X
This is very general not knowing your situation, but generally if you are leveraged correctly you never want to pay off rentals. It’s dead equity.
This post was edited on 8/12/19 at 7:30 am
Posted on 8/12/19 at 7:39 am to TitleistProV1X
quote:
I put an extra $700 per month towards my principal so not sure how long I truly have left but I could look into that.
An extra 42k would certainly make a difference
I'd definitely look into what you have left to be able to make a good judgement here. Posted on 8/12/19 at 7:55 am to OleWarSkuleAlum
Can you explain your thought process? I have been debating on whether or not to go after other properties or pay off each property as I go.
Also, I am sure your thought process is a one size fits all, I am just curious to hear your thoughts.
Also, I am sure your thought process is a one size fits all, I am just curious to hear your thoughts.
Posted on 8/12/19 at 8:32 am to TheRustyShackleford
LINK
read last 2 pages of link above.
it is dead equity because it is not working for you in a leveraged situation anymore unless you do a cash out refi later or something else. would have been easier just not even paying it off in first place. HELOC or LOC rates after the fact SHOULD be higher than your mortgage rate. see the issue now? more cash flow with paid off property? sure? but lower COC return. YOu could have used what was used to pay off to acquire more leveraged cash flowing properties. Or you could do what i explained in link above in my last post. no really wrong answer. pros and cons either way.
read last 2 pages of link above.
it is dead equity because it is not working for you in a leveraged situation anymore unless you do a cash out refi later or something else. would have been easier just not even paying it off in first place. HELOC or LOC rates after the fact SHOULD be higher than your mortgage rate. see the issue now? more cash flow with paid off property? sure? but lower COC return. YOu could have used what was used to pay off to acquire more leveraged cash flowing properties. Or you could do what i explained in link above in my last post. no really wrong answer. pros and cons either way.
This post was edited on 8/12/19 at 8:41 am
Posted on 8/12/19 at 8:34 am to OleWarSkuleAlum
quote:
It’s dead equity.
I don't understand this. I have equity in a rent house that is used for a LOC to buy more rent houses. It also contributes to my net worth.
ETA: was typing while Fat Bastard was posting. Thanks fat
This post was edited on 8/12/19 at 8:46 am
Posted on 8/12/19 at 8:40 am to TitleistProV1X
Not sarcastic here. What is the draw to giving the money to the bank either in lump sum or extra payments?
Investing your proceeds (depending on your economic plans) should be considered. Remember that you can always throw money at a mortgage anytime. I would consider making it grow.
Investing your proceeds (depending on your economic plans) should be considered. Remember that you can always throw money at a mortgage anytime. I would consider making it grow.
Posted on 8/12/19 at 8:46 am to Motorboat
Posted on 8/12/19 at 8:47 am to Motorboat
quote:
ETA: was typing while Fat Bastard was posting. Thanks fat
no problem. read that link also I just posted. it will help you and goes more in depth. 
Posted on 8/12/19 at 9:25 am to BestBanker
quote:
What is the draw to giving the money to the bank either in lump sum or extra payments?
Didn’t really think about it much just saw how much I was scheduled to pay in interest over the 30 years, so figured I might as well put the extra rental money towards the principal each month.
I have two little ones and moved further away from the place recently so I’m seriously considering selling the place next summer because I really don’t have the time to deal with it.
Posted on 8/12/19 at 9:59 am to TitleistProV1X
You could buy more rental properties nearby?
Posted on 8/12/19 at 11:19 am to eng08
OP, I used to be of the mindset to pay off mortgages quickly. But as long as you have good credit, there's 0 reason to pay anything extra on a mortgage until you pay it off.
You'd be better off putting your new money and $700 extra payment into something like a Money Market account and then when you have the entirety saved pay it off and close the loan.
Your interest rate is low historically at 5% and it sounds like you have decent equity. As said, you then have cash on hand yourself and don't have to get a loan from a bank for something else you could simply use this cash for. You may not want another rental now, but that can change in 6 months or 3 years.
You'd be better off putting your new money and $700 extra payment into something like a Money Market account and then when you have the entirety saved pay it off and close the loan.
Your interest rate is low historically at 5% and it sounds like you have decent equity. As said, you then have cash on hand yourself and don't have to get a loan from a bank for something else you could simply use this cash for. You may not want another rental now, but that can change in 6 months or 3 years.
Posted on 8/12/19 at 12:47 pm to TitleistProV1X
Great. If you plan on selling it next year don't apply any more money towards it. Since you have youngsters, those tax deductions will go away as you get older. Take advantage of all tax deductions that are available while they're young. Save and invest. Don't give the bank anymore extra Money. They've got enough.
Posted on 8/12/19 at 1:35 pm to Fat Bastard
quote:
see my post above and then read this DEAD EQUITY
Its a great way to make money and a great way to lose it all. Leverage also means it doesn't take much to wipe out your gains.
Posted on 8/12/19 at 1:59 pm to TitleistProV1X
Go to casino. Put it all on black.
Profit
Profit
Posted on 8/12/19 at 2:05 pm to BestBanker
Thanks. I always put $4800 per year per child into their 529s but I could put more in there. If not, I guess I’ll give to my broker and he’ll invest in more ETFs and stocks or throw some more in my IRA.
Posted on 8/13/19 at 7:41 am to TitleistProV1X
Everything you consider depositing your money into doesn't necessarily need to be surrounded by a tax law. Meaning, consider an investment that's not qualified money (IRA, 401(k), 529). Those numbers there indicate sections of the IRC, and tax law changes all the time.
Do some private stuff too. Balance is key.
Do some private stuff too. Balance is key.
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