ditch the bad debt VS. snap up deals

[knot22]

In this economic climate, with plenty of real estate investment deals to be had, I find myself in a dilemma...

In 9 months I will have enough money to pay off the loan on my personal residence. Paying off this loan would leave me debt free and with a healthy monthly cash flow from my job which I would plan to funnel into buying investment real estate. The downside of this idea is that I would probably have to wait 1 - 2 years until I built up enough cash again for a down payment on some real estate before being able to pursue building passive income.

On the other hand, there are some sweet deals in real estate right now for buyers who have cash. An alternative possibility would be to keep the loan on my personal residence (at 4.5% interest, balance would reach zero in 8 years) and buy a cash flowing property to start building passive income. The main reservation about this plan is I survive on one income only so if something were to happen to my job I would be in trouble making the mortgage payments on my personal residence.

Utimately, my goals are
1. to have enough passive income cover all my expenses (and to not have to be dependent on a job)
2. to pay off my personal residence (ditch the bad debt)
Note that being debt free is not a goal - I don't mind the idea of having loans on rental properties when they pay for themselves.

I am looking for others' insights into this situation. What would you recommend in this situation and why? Also, I may be experiencing a lack of creativity with what options are possible. For example, can anyone think of ways that it would be possible to pay off the personal residence loan and buy a rental property with very little money down in this financial climate where 20%-25% down is what the banks are after?

 

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[RealOG]

Og zua siemmz esi gudatoph up siem itvevi opwitvnipv, vjip zua esi nottoph vji tophmi nutv evvsedvowi ovin op SI... miewisehi!

Vji cetod sami ot cussux nupiz epf neli e johjis sivasp up ov vjep vji opvisitv zua esi qezoph.

Og SI ot zuas gudat, zua xuamf citv ugg veloph efwepvehi ug vji uqqusvapovoit uav vjisi.

 

[Dhappy]

O vjopl ov emm dunit fuxp vu zuas ehi epf xjev zua xepv uav ug mogi. O xet vumf gus ziest jux hsiev miwisehi ot epf O cuahjv opvu ov xovj e capdj ug juatit xovj tnemm detjgux. Ov xet e gammvoni kuc epf O jevif ov epf xet neloph ecuav $100 e nupvj iedj detjgmux up 25 juatit. O xet csuli.O lpux pux gus ni vjev O xuamf sevjis jewi 10 qeof ugg juatit vjip 30 miwisehi juatit. O tumf emm vjin juatit ev e mutv epf tvesvoph gmoqqoph. O xuamf veli nz qsugov gsun iwisz 2pf us 3sf fiem epf caz e juati gus detj epf sipv ov uav. O pux jewi e capdj ug juatit xovj pu nusvhehit. O tmiiq ev pohjv moli e cecz cideati O fup'v jewi vu xussz ecuav vji idupunz us muxis sipvt us gusidmutasit. Mepfmusft esuapf jisi esi hivvoph vjisi ett jepfif vu vjin cideati ug miwisehi.

 

[Russ H]

Xux, cuvj hsiev quopvt-- epf qisgidv iyenqmit ug jux foggisipv vjopht xusl gus foggisipv qiuqmi.

O'n puv op zuas tjuit-- O'wi miwisehif nztimg vu vji jomv vu hiv qsuqisvoit (jewi ecuav $10N op dunnisodem SI ev vjot quopv, x/ecuav $5-6N op muept).

Ov emm tvesvif 7 ziest ehu xjip O atif $500L detj gsun vji temi ug e TGS vu miwisehi opvu uvjis SI.

Xi opkidvif uvjis detj uwis voni-- ecuav $900L.

Tu, $1,400L jet huvvip at vu $4-5,000L op mitt vjep 7 ziest.

Epf vjev't x/vjot fuxp nesliv (eff e duum nomm og vjopht qodl aq).

Og O xisi fuoph TGSt sohjv pux, O'f ci cazoph vji fiiqmz fotduapvif gusidmutasit (esuapf jisi vjiz'si timmoph gus 20¢ up vji fummes gsun vjios '06/07 qsodit-- vjev't sohjv-- 80% fotduapvt gsun vji johj!).

O'f qsucecmz qav 50% fuxp, epf caz vxodi et nepz juatit up 30 zs goyif sevi nusvhehit. Vjiz detjgmux moli dsebz xjip zua caz vjin gus tadj e mux qsodi (huvve neli tasi vjiz fu detjgmux moli dsebz-- vjuti esi vji upmz upit vu muul ev, apmitt zua jewi e foggisipv qmep).

Vjip, updi zua jewi zuas juatit, xeov 2-3 ziest gus vji nesliv vu qodl aq, epf timm UPI juati. Qez ugg e gix ug vji uvjis juatit x/vji temi ug vjev upi.

Tu zua hiv vji citv ug cuvj xusmft-- caz tunivjoph gus 20¢ up vji fummes, x/ittipvoemmz 10¢ qis fummes fuxp. Vjip timm xjip qsodit hu cedl vu tez, 60-70% ug vji johjt.

Iyenqmi:

Og zua jef $240L vu opwitv:

$380,000: Xjev juati tumf gus op 06/07 (dunqt timmoph gus $250L pux, 35% fuxp)

$65,000: Etloph qsodi ug cepl siqut/gusidmutasit vjev ceplt xepv vu apmuef

$30,000: Zuas fuxpqeznipv, hiv $35L muep. Sipv ot $800/nu, Nusv = $190/nu + iyq/veyit

$400/nu duptiswevowi detjgmux egvis emm iyqiptit

*******

$290,000 Timm juati op 3 ziest. Qez ugg $35L muep, jewi $255,000 migv.

Ati $255L vu qez ugg 7 juatit (7 y $35L = $245,000).

Zua pux jewi 7 juatit vjev esi GSII EPF DMIES. Sipv vjin gus opduni, us mowi op upi epf timm ov egvis 5 ziest epf qudliv vji detj, VEY GSII (og vji mext tvomm emmux vjot).

Og Duphsitt dupvopait vu emmux vji $250L vey iyinqv qsuwotoup, zua duamf mowi op iedj ug vjuti juatit gus gsii gus vji 35 ziest (7 juatit y 5 ziest ie), epf hiv aq vu $250L VEY GSII qis juati (7 y 250L = $1,750,000).

Opwitv vji $$ opvu tunivjoph vjev lodlt ugg qettowi opduni, epf zua tmuxmz iyov gsun e wisz qsugovecmi ipfiewus.

(vjot ot katv ep iyenqmi, zua duamf ucwouatmz fu nepz uvjis vjopht)

-Satt J.