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Should I PrePay this Rent ?
Old 08-07-2006, 01:42 PM   #1
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Should I PrePay this Rent ?

I have a vacation mobile home in a mobile home park on the colorado river. The park is owned by the BLM and managed and run by the county. I am currently paying $175.00/month for rent on the space. Effective Sept. 1 there will be a rate increase to $220.00/ month. I have the option to PrePay my rent for up to 3 years at the current rate of $175.00/month. I would need to pay $ 6,300.00 up front but I would be set for the next 3 years. I don't plan on selling or moving. Should I go ahead an pre pay for the next 3 years ?
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Re: Should I PrePay this Rent ?
Old 08-07-2006, 01:43 PM   #2
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Re: Should I PrePay this Rent ?

yes
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Re: Should I PrePay this Rent ?
Old 08-07-2006, 01:58 PM   #3
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Re: Should I PrePay this Rent ?

You save $44. a month if you prepay. Theres a couple different issues I would consider.

1) Are the rent spaces likely to increase even more if you don't prepay?

2) If you don't prepay, can your money be invested where you'll make more than 44.

3) I sometimes prepay bills so I don't have to worry about them.

I would prepay.
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Re: Should I PrePay this Rent ?
Old 08-07-2006, 02:02 PM   #4
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Re: Should I PrePay this Rent ?

Back of envelope says that's about a 7% ROI annually, garanteed. If you plan on staying the 3 years, I would do it.
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Re: Should I PrePay this Rent ?
Old 08-07-2006, 04:01 PM   #5
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Re: Should I PrePay this Rent ?

Quote:
Originally Posted by MonarchDon
I would need to pay $ 6,300.00 up front but I would be set for the next 3 years. I don't plan on selling or moving. Should I go ahead an pre pay for the next 3 years ?
You're liquidating $6300 up front to save $45/month for 36 months.

If you left that $6300 in a MM account at 5%/year then in three years you'd have about $7320.

Most people would spend the $45/month and three years later they'd wonder what happened. If you save that $45/month (instead of letting it trickle through your fingers!) at the same interest rate then you'd have about $1744. So you give up $1020 in savings to earn $1744 and come out ahead by $724, but again that ONLY works if you SAVE the $45/month.

I know you don't plan on moving, but would a layoff or mass firings change your plan? Any other financial shocks that you'd want to have $6300 handy for an emergency fund?
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Re: Should I PrePay this Rent ?
Old 08-07-2006, 06:01 PM   #6
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Re: Should I PrePay this Rent ?

Quote:
Originally Posted by Nords
I know you don't plan on moving, but would a layoff or mass firings change your plan?* Any other financial shocks that you'd want to have $6300 handy for an emergency fund?
I'm still unemployed (I haven't figured out if that is a good thing or bad thing) The reason I'm locked in at 175/m now is because I prepaid 2 years ago. The rent increases every year. I have the cash but I'm a very very good saver if I keep the $$ in money market I won't spend it. I like being paid in advance because I sleep well at night without any debts. Just trying to decide if letting go of $6,300. now is a smart move
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Re: Should I PrePay this Rent ?
Old 08-07-2006, 09:11 PM   #7
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Re: Should I PrePay this Rent ?

I think the bigger concerns are:

1) What if something unexpectedly forces you to move a year from now? What if something changes and you are no longer willing/able to vacation in this spot anymore? How are you going to get your pre-paid rent back? Sounds like a hassle.

2) What if the organization/county has financial difficulties and goes bankrupt? Not likely (more of a concern if you were dealing with a for-profit landlord), but municipal agencies have declared bankruptcy before. How are you going to get your pre-paid rent back? Sounds like a hassle.

If this pre-paid rent is refundable, I'd be sure to get it in writing with a list of approved reasons for issuing a refund.
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