I have been watching my pennies all year and have a plan to pay off my mortgage by the end of 2014. “Why on earth would you do something so crazy?”, many people ask. Well, I really don’t like debt and it sends chills up my spine just thinking about having a mortgage and business debt as well. I would much rather get rid of my large debt before I take on another one, even though it is technically for investment purposes.
My Plan for 2014 and Beyond
The plan is pretty basic to start out. I want to figure out how cheaply I can live in order to get rid of my mortgage debt by the end of December. All the while, I will be looking at investment properties for the 2015 season.
My friend Mike just shakes his head at my crazy ideas and doesn’t understand why anyone would want to pay their mortgage off early. But, in turn I am shaking my head when he tells me of his aspirations to buy a $300k home, even though it will “be a little tight for the first two or three years.” So, he is going to tie up all of his money for the next 10 years (at least) and I will be earning about $6k more every month by investing that same amount of money into a multiplex. Which plan sounds more crazy to you?
For the longest time I was interested in buying houses to rent out. It still isn’t a terrible idea, but unless you want to finance your way into purchasing 10 properties in 10 years (and go over $1 million in debt), this is quite a risky investment. In order to keep my debt at a minimum, I would buy one house at a time, work to pay it off, and then move on to the next one. The only problem with this plan is the inherant risk in only owning one rental dwelling. If the tenants decide not to pay, then I am simply not going to get paid anything for my efforts. If, however, I own a building that houses multiple renters, then there is a better possibility that I won’t get skunked when it comes to my next month’s rent.
I have been looking at various multiplexes in my area already. At this very moment, there is a 12-plex building for sale for $300k. At the very minumum, I would be able to charge $650 per month for each unit, which will earn me a total of $7,800 per month. After a mortgage payment of $1,500 or so, I will have a net gain of $6,000 every month.
Of course some money will go towards roof repairs and vacancies, but overall, the net earnings on this building should be well over $4,000 per month, which is obviously much more than the $1,000 per month that each of you is hoping to achieve. With this though, your day job may become 100% optional. How does that sound?