How to be Setup for Life ?

[GeorgeF]

As your investments are concentrated in one local real estate market you should make sure it is not dependent on a single employer, and that there are no plans to allow developers to overbuild the market.

As to the loans

I would suggest that you borrow more on the rental, I think 60%-80% of value. The only reason own rental properties is that the rate or return on property is much higher than that of the loan. If that is not the case sell the rental.

The loan on the house does not seem out of line.

[gvibes]

I don't think that 1M = f-u money. Not even close. I have nothing further to add.

[Misfire]

[ QUOTE ]
I don't think that 1M = f-u money. Not even close. I have nothing further to add.

[/ QUOTE ]

1M is plenty FU money for just about anyone who doesn't need luxury to feel good about themselves. You can live comfortably off the interest 1M generates in a bad CD, let alone a sound investment.

[Misfire]

If I'm not mistaken, the tax benefits of having a mortgage only apply to the amount of interest paid. Why would you pay $X in interest to avoid paying only a percentage of $X in taxes. Sounds -EV to me. Pay off the mortgage.

[eastbay]

[ QUOTE ]
If I'm not mistaken, the tax benefits of having a mortgage only apply to the amount of interest paid. Why would you pay $X in interest to avoid paying only a percentage of $X in taxes. Sounds -EV to me. Pay off the mortgage.

[/ QUOTE ]

If you can invest the money elsewhere for a better return than your interest minus tax breaks, it's a net win not to pay it.

eastbay

[RunDownHouse]

You have a seriously flawed understanding of finance.

[Misfire]

[ QUOTE ]
If you can invest the money elsewhere for a better return than your interest minus tax breaks, it's a net win not to pay it.

[/ QUOTE ]

Adjusted for its beta, you're going to be hard pressed to find an investment that yields enough to justify borrowing against your home in order to invest.

[eastbay]

[ QUOTE ]
[ QUOTE ]
If you can invest the money elsewhere for a better return than your interest minus tax breaks, it's a net win not to pay it.

[/ QUOTE ]

Adjusted for its beta, you're going to be hard pressed to find an investment that yields enough to justify borrowing against your home in order to invest.

[/ QUOTE ]

Maybe you can comment on this example:

http://www.fool.com/foolu/askfoolu/2...oolu010307.htm

eastbay

[Misfire]

1. They're still not considering risk. Yes, index funds do very good long term, but they are still riskier than real estate. Not everybody holds onto their home 10+ years anyway. It would really suck to sell after, say, 3 years of this while your index fund is down AND you have less equity in your house than if you had just knocked out the principle. "Fred" averages what, less than $8.5k/yr more than "Phil" over 30 years. Adjusted for risk, his edge isn't even that much.

2. There is security in owning your home (and everything else of yours) free and clear. I have paid off every single debt I owe. This gives me plenty of extra money to invest (like "Phil"), but it also gives me the opportunity (or rather, the security) not to HAVE to generate that extra income I used to have to pay on my debts. They're gone. I'm no longer running with ankle weights. I could literally fold up my business tomorrow and go work part time at McDonald's and maintain my same standard of living (sans investing). More importantly, if my business ever does go sour, I won't have creditors hanging over my head.

[eastbay]

I think your points are valid, and it comes down to an individual's goals and proclivities.

FWIW, I also choose to pay down my mortgage at the fastest pace I can, rather than try to invest that money elsewhere, and pretty much for the same reasons you mentioned.

eastbay