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As others have stated, most of us don't have much of an outlet to celebrate financial victories, so this post is mostly just cheering. I know this won't be an entirely popular choice, but this week we made the decision to pay off our rental house! I sold about $55k of highly profitable investments (22% gain over the last 2 years), and sent the wire this week to pay off the house. I fully recognize that this was not the most purely logical choice... But the desire to pay it off has been nagging at me for the last 6-12 months, and I decided that we would take advantage of the high-flying stock market to go ahead and pull the trigger. We started dramatically accelerating our principle payments back in May (making $7k/mo payments, when it had a $90k balance), then this month, the balance was finally low enough that we could pay it off with our taxable investments while not completely draining them. (Side note, we happened to sell on the day before the stock market dropped this week! Lucky timing!)
The house is worth ~$190k, purchased 6 years ago originally as my personal home in OKC for $177k. Since then I've gotten married, had 2 kids, and we moved up to Alaska 2 years ago, at which point we started renting it out. It's currently rented for $1495/mo total, so with it now paid off, I'll be drawing off ~$1k/mo in extra income (after setting aside cash for management/maintenance/taxes/insurance expenses). It's not earning me a killing (~7% ROI), but for the moment, we're happy with it. We're also exploring the option of selling it next summer to my brother & his wife for their personal home -- they currently live around the corner from our rental house, and they've expressed some interest in potentially buying it. But if they don't, we'll likely just continue to hang on to it for now (again, I know that many would probably argue to sell it regardless, given the relatively low 7% ROI).
So why are we making these decisions with our rental house that seemingly go against all normal advice (selling investments to pay off a 2.75% mortgage, and accepting a relatively low 7% ROI)? The short answer is flexibility. We're still staring down the likelihood of my wife getting medically retired from the military, and I'm still trying to decide on what I'm going to do with my own career. I'll either be reassigned next October if I stay on active duty, or I'll leave active duty and switch to the national guard. So the largest impetus for us is to reduce our expenses, and to simultaneously provide an extra steady income stream to help us mitigate some of the uncertainty that we'll be facing within the next year. And although this is not, by pure numbers, the best possible option, we feel alot more comfortable with our situation. We've reduced our level of risk significantly, which evens out the numbers in my mind. Now that we're no longer focused on this rental house, we can direct what feels like a massive firehose (50% of our strong income) toward bulking up cash & investment assets for whatever comes next in our lives with way less stress/uncertainty/concern.
So we're quietly celebrating a little bit, because we're thrilled to now have no debts except for our current home, and a net worth around $800k at age 32/33 (albeit mostly in retirement investments & real estate).
The house is worth ~$190k, purchased 6 years ago originally as my personal home in OKC for $177k. Since then I've gotten married, had 2 kids, and we moved up to Alaska 2 years ago, at which point we started renting it out. It's currently rented for $1495/mo total, so with it now paid off, I'll be drawing off ~$1k/mo in extra income (after setting aside cash for management/maintenance/taxes/insurance expenses). It's not earning me a killing (~7% ROI), but for the moment, we're happy with it. We're also exploring the option of selling it next summer to my brother & his wife for their personal home -- they currently live around the corner from our rental house, and they've expressed some interest in potentially buying it. But if they don't, we'll likely just continue to hang on to it for now (again, I know that many would probably argue to sell it regardless, given the relatively low 7% ROI).
So why are we making these decisions with our rental house that seemingly go against all normal advice (selling investments to pay off a 2.75% mortgage, and accepting a relatively low 7% ROI)? The short answer is flexibility. We're still staring down the likelihood of my wife getting medically retired from the military, and I'm still trying to decide on what I'm going to do with my own career. I'll either be reassigned next October if I stay on active duty, or I'll leave active duty and switch to the national guard. So the largest impetus for us is to reduce our expenses, and to simultaneously provide an extra steady income stream to help us mitigate some of the uncertainty that we'll be facing within the next year. And although this is not, by pure numbers, the best possible option, we feel alot more comfortable with our situation. We've reduced our level of risk significantly, which evens out the numbers in my mind. Now that we're no longer focused on this rental house, we can direct what feels like a massive firehose (50% of our strong income) toward bulking up cash & investment assets for whatever comes next in our lives with way less stress/uncertainty/concern.
So we're quietly celebrating a little bit, because we're thrilled to now have no debts except for our current home, and a net worth around $800k at age 32/33 (albeit mostly in retirement investments & real estate).
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