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married couple from the bay area california
Old 04-05-2014, 05:33 PM   #1
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married couple from the bay area california

Hi! We are 41/42 year-old couple from the bay area planning to retire at age 55 and 60. I just want to say all your stories are inspiring. I do have a question, we are planning to pay off our 2 rentals in Las Vegas in the next 10 years and this would replace the income of my DH so he can retire at 55. We have a property manager in Las Vegas. We paid off our primary residence 2 years ago (actually its anniversay is tomorrow). Do you think it is better to pay off our rentals or just invest that money in stocks. We maxed out our 401ks and they are heavy on stocks. Any thoughts? By the way we have 2 kids( 17 and 7)
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Old 04-05-2014, 05:38 PM   #2
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What is your mortgage rate?
There are calculators you can use, but nobody can answer your question without the details.
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Old 04-05-2014, 05:44 PM   #3
Confused about dryer sheets
 
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Mortgage rate is 4.25%
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Old 04-05-2014, 06:51 PM   #4
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Welcome to the forum. I think we would be doing you a disservice by trying to answer your question with such limited information. Without having a complete financial picture, it's impossible to give you any meaningful advice.

In general, when this question comes up, opinions vary greatly, but a lot of the members will tell you to put some money towards extra principal and some in the stock market, so it's not all or nothing. Hope that helps.
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Old 04-06-2014, 05:11 AM   #5
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Personally I despise debt and paid off my rental properties. However, I made sure I had sufficient cash remaining in an emergency fund, which for me is a minimum of five years of living expenses. That's more than most people keep, and I have sufficient funds for maintenance of the rental properties including covering any expenses while they may be vacant. The bottom line is don't make yourself cash poor by paying off the debt or putting it all in stocks. The last thing you want is to need the cash while the stock market is down. My intention of having five years of living expenses is to be able to ride out a market crash if needed without being forced to sell in that down market.
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Old 04-06-2014, 04:35 PM   #6
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Quote:
Originally Posted by retireby5560 View Post
Hi! We are 41/42 year-old couple from the bay area planning to retire at age 55 and 60. I just want to say all your stories are inspiring. I do have a question, we are planning to pay off our 2 rentals in Las Vegas in the next 10 years and this would replace the income of my DH so he can retire at 55. We have a property manager in Las Vegas. We paid off our primary residence 2 years ago (actually its anniversay is tomorrow). Do you think it is better to pay off our rentals or just invest that money in stocks. We maxed out our 401ks and they are heavy on stocks. Any thoughts? By the way we have 2 kids( 17 and 7)
I also live in the bay area, retired, and have a couple of rentals paid off.

SS, plus, rental income, and investment income, makes life very comfortable. If you were able to manage your rentals, you could increase your cash flow.

One benefit of rentals, rents are usually stable and adjust with inflation.
Just be sure the local economy is good. (In the past, Las Vegas, has had
it's ups and down).

As you know, in the bay area, if you have rental properties, close to
schools, (Stanford, USF, Berkley; good jobs, silicon valley,) rents are
very good, as well as appreciation in real estate.

You might want to "trade" your 2 Vegas properties for one in the Bay
Area, if you plan to retire here. By trading, you defer any gains.
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Old 04-06-2014, 06:54 PM   #7
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As general rule the tax deduction for interest are far more valuable when you are working than when you are retired. Simply because you are typically in a higher tax bracket. Are you planning on retiring in the Bay Area or Vegas?.

A 4.25% mortgage is good, but not great rate so I personally wouldn't be in hurry to pay it off until you retire. But once you retire I think I'd be inclined to pay it off.

But is Ready said, there are so many variable it is impossible to give anything but generic advice.


I have rentals in Vegas, which I bought because the CapEx rate is/was so much better in Vegas, than a high housing market like SF Bay Area or Honolulu.
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Old 04-11-2014, 06:36 PM   #8
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4.25% is a great rate for an investment property.
best i can get now is 4.625%.
i would never think of paying down a mortgage when the cost of borrowing is that cheap as i can make 3 times that much return by saving up spare cash & buying yet another rental property.
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Old 04-13-2014, 04:14 PM   #9
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In general, with interests rates as low as they as are, I prefer to keep the mortgage and the interest write-off that comes with it. Keeping that extra cash in the bank/invested allows you to have more flexibility for leisure pursuits, or life's unexpected emergencies. You can always pay the mortgage off later, if you have so much surplus that you just can't wait anymore.
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