Saturday, January 29, 2011

big decisions

i've been looking at our finances and looking at ways to improve our cash flow. on thing that has been jumping out at me is a rental property that we purchased about 8 years ago on a fifteen year note. the cash return on this property is pretty close to 0%, though, we obviously are increasing our equity position with tenants paying down the note each month.

in 7 years, we will own the property free and clear, and it will start returning us around $1,000 a month (after property management, hoa fees, insurance, and taxes) in cash.

we could pay this down early and start getting the benefit of this return today, though this would be a pretty big drain on capital, it's hard not to consider. the annual return would be around 12-13%, the only real concern that i have is the opportunity cost of putting all that money into play. over the long term, it's hard to refute this as the best play -- we have the money earmarked for investment, anyway. the other option would be to put that toward another property, but the cash return on that would probably be half.

it seems like a no brainer, but i'm still on the fence about it. when my wife and i got married, we joked that she is responsible for all the small decisions and i'm responsible for all the big decisions, and up to this point there haven't been any big decisions.

stay tuned . . .

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