Paying Off Our First Rental Property

Paying Off Our First Rental Property

How We Got Here

We’ve always had real estate as part of our retirement plan. It’s a constantly-evolving vision, as most long-term plans are. The property we just paid off is in the Chicago area and was purchased by my husband in the mid-2000’s on a 30-year mortgage.

We met in early 2010, and a year later we had decided to get married and move across the country for school. Selling the property at that time would have made zero financial sense, with the housing market still in its Great Recession death spiral. We signed on with a rental management company, packed our cars for the West Coast, and became long-distance landlords.

The property has more or less broken even for us over the years with a steady stream of long-term tenants.

Where Did All That Payoff Money Come From?

Our final payoff amount was about $115k, and that came partially from the profit on that house we sold in May.

Our big trip for this year was cancelled, and all our family fun has been in the vein of paddle-boarding, hiking, and playing soccer in the local park, so the most expensive thing in our life for the last 6 months has been grocery deliveries.

That reduction in spending led to quite a bit of cash-on-hand that we didn’t plan on, in addition to the profits from the home sale.

We held onto that cash from May through July, just to make sure we didn’t want to keep it liquid due to the covid crisis. We made the payoff in August as the world panic started to abate (and our bank started seeing people in-person again).

But What About (Reasons to Not Pay Off Debt)???

Why pay off a property when you have all those tax deductions? Or when you can get more in interest on other investments than you’re paying on the mortgage?

There are lots of arguments out there for letting mortgages and other debts linger around longer than they need to (…but you can leverage it!”).

Yes, it is smart to consider these factors when deciding when and how to pay down debt, but debt is still always a liability. And passive income is always awesome.

With this one fell swoop we paid off a heck of a lot of debt and (thanks to our management company handling all our landlord headaches) suddenly have monthly passive income from this investment.

Just like with that student debt (nearly $350k!) we paid back in the 5.5 years after graduation, we have no regrets on paying this mortgage off early.

Did You Buy Another House?

No. We currently just have the one long-term rental in the Chicago area and that vacation rental/second home in Sedona.

We are renting our primary residence for at least the next year while we decide if we want to buy another primary home, buy another investment property out of state, and/or build something again. We actually love being renters.

Is That Your Rental Property in the Banner Photo?

No. But I will happily take it if someone would like to give it me, because it’s super cute. That’s a pic I took this summer in Coupeville, Washington.

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