Hi
In lucky position to have some equity back in a rental property. Trying to work out if should sell or hold. Ideal medium term view is to pay chunk off mortgage on current home but obviously there are market and economic risks to doing now versus 10 years time. i.e I save interest on other mortgage, I avoid having to fork out cash shortfall annually, risk of major work etc etc.
I'll throw down numbers, if anyone has a few mins and some advice would be welcome. Should say I can afford current mortgage and the shortfall so this is purely the numbers.
Current Equity-40k (after all fees deducted)
Equity in 10 years-100k (assuming zero increase in price)
If I factor in an annual cash shortfall (Rent In less Mortgage, repairs, painting, tax etc) of 4k and the interest I would have saved had I paid 40k off the 3.2% mortgage I'm down to only being 8k better off. (100k-40k(equity now)-40k(shortfall)-12k(interest saving))
Obviously I'm making a lot of assumptions here, even a 2% annual increase in prices makes the figures stack up a lot better, equity would be 50k more.
Is this the right way to look at it or should I purely look at a on investment yield? That's 5% (13k rent on 260k value).
Thanks
In lucky position to have some equity back in a rental property. Trying to work out if should sell or hold. Ideal medium term view is to pay chunk off mortgage on current home but obviously there are market and economic risks to doing now versus 10 years time. i.e I save interest on other mortgage, I avoid having to fork out cash shortfall annually, risk of major work etc etc.
I'll throw down numbers, if anyone has a few mins and some advice would be welcome. Should say I can afford current mortgage and the shortfall so this is purely the numbers.
Current Equity-40k (after all fees deducted)
Equity in 10 years-100k (assuming zero increase in price)
If I factor in an annual cash shortfall (Rent In less Mortgage, repairs, painting, tax etc) of 4k and the interest I would have saved had I paid 40k off the 3.2% mortgage I'm down to only being 8k better off. (100k-40k(equity now)-40k(shortfall)-12k(interest saving))
Obviously I'm making a lot of assumptions here, even a 2% annual increase in prices makes the figures stack up a lot better, equity would be 50k more.
Is this the right way to look at it or should I purely look at a on investment yield? That's 5% (13k rent on 260k value).
Thanks