Buy another home or pay down the current mortgage

Can you find a place that will cashflow in NYC? or you just banking on appreciation (speculation)?

20% down with a 30yr fixed and cashflow would be a decent investment in NYC

jifjif, sounds like u are a great stockpicker but... Why would you pay down a 4.75% loan that offers ordinary income tax writeoffs???? So you pay down a 4.75% loan. Now what? You'll give back alot of that in increased income tax. I would invest in another property with a one year lease already intact. Do the math and see if it's doable. If you are under say 50 yo then you can just hang on and build equity. In 20 years you'll have a much smaller loan on a property with an odds on big price increase. double? triple?

Cashflow would be negative until monthly payment (mortgage + maintenance) equates to rental income and after income tax. Marginal payment toward the principle is also considered but not as a deal breaker.

Of course I am banking on double return (appreciation and cashflow) but looking at next 5 years, I wonder if I should be more liquid and get quicker returns on other investments.

I was thinking about repaying portions of my current mortgage because I would borrow against that if I needed some cash for investments.

steveF means in Miami or Vegas, and only if you have a loved one to do free property management for you.

SteveF you have point and I have considered that.

I think paying back current mortgage seem like more emotionally based (not having debt) than anything else and not a wise one.

jifjif, I know the feeling. Maybe you will be happier paying down the mtg and it just works for you. If that's the case then I say go for it. You'll sleep well and be happier. I know myself that I wouldn't be happier. I have a friend who has no debt and makes a fortune but that's what he wants. Good Luck bro.

Thanks steveF. I guess I see property like gold; I will just sit on it for a while (until the prophecy of Mad Max realizes).

jifjif... check out SteveF's credibility on this board. It is pretty much nil, and that comes from folks on both side of the argument.

He's a guy who bought in the bubble, and is trying to cheerlead, to the point of lying about the actual market numbers (down 17.6% or over 20% depending on which measure you use) claiming that we're only down a couple points.

For the sake of this argument, I think it's helpful to look at mortgage debt the way the government does. There is an undeniable tax benefit to paying mortgage interest on an owner-occupied property - not so for other types of debt. Paying down principle has little effect on that, one way or another, early in the amortization of a loan. It may help you sleep better, but it benefits your bank more than it does your bottom line. Then again, if you are losing money on an "investment" property, there can be tax benefits as well. But you have to lose money to get them, which may trouble your sleep even more.

In either case, however, you're probably not going to be looking at a 27% annual return. I'm no wealth analyst (all my $ is tied up in real estate!), but those numbers seem too good to walk away from. If you have no credit card or student loan debt, and no car payments, I salute you. I vote you sit on your current property, with its phenomenally low rate, while the bank continues to bear the brunt of the risk. It's the least they can do for you after your taxes bailed them out.

Be very aware, the tax deduction for investment property is VERY much on the table. This might be part of the tax overhaul, the deduction for primary is politically safe but for investment.. Mmmmmmmm

jifjif, one word: diversification

any deductions on investment properties are toast.

What is the scenario in which "Mad Max" makes NYC real estate prices rise?

Isn't the value of NYC real estate 100% based on the legitimacy and competence of US and NYC government, ranging from enforcement of legal rights to exclude others from your unit to collecting the garbage and preventing epidemics? If you expecting to live by your gun, the last place you'd want to be is in a town where you are dependent on the willingness of underpaid municipal workers to come to work for water to drink, or where the smallest regulatory screw-up of the electric grid could make the entire upper-class housing stock uninhabitable in a matter of weeks.

tina, that indeed is a good point. I think paying down current mortgage is not an option anymore. And yes I have no other debt except the current property. I dont think I can continue 27% return every year but I been quite lucky in investing (got out before the bust by chance because I needed to fund another personal project, and when that project didnt materialize, I got in to gold and bought in equities around when Citi was around $1. Cashed out portion of it to fund the current place). I didnt go beyond 25% down because I knew the rate was low with 30yr lock.

Now that I have cashed a bit more, I am looking in to other investments. Thats why I was considering buying another place before the inflation catches up to interest rates.

bugelrex, thanks for the heads up on that. I didnt realize it was an on going debate.

sunday, yes looking for diversification. I think I am comfortable with my existing equity portfolio. I stayed out of others because I frankly don't know too much about them.

I have been locking my earnings every step and it does get tiring after a while, hence my thought on investing in another property.

if you want to diversify, why not buy re in another city. It will take some time to investigate. But there is another huge wave of foreclosures due and when they hit, prices will drop again. Who knows if it will be the bottom but there are some cities where it will have to be damn close.

i think the problem with some of those cities where foreclosures are hitting is that the rental market is awful, so although you may get a good deal on purchase it is near impossible to find good renters

apt23, to rivas77's view, I thought the same. I looked at Miami, Chicago, SF, and LA. I honestly do not know the cities enough to make that commitment. I was thinking about London but price range is rather difficult to obtain.