On Mon, 16 Jan 2006 16:07:46 -0600, hatespam[at]hatespam.com (Veritas)
wrote:

- quote -

I can afford the extra amount not covered by the rent which mainly go
for insurance and taxes. My hope is to eventually sell the property
to my current tenant , taking back the mortgage. I have 5-7 more
years until retirement and would like to "retire" with this mortgage
paid off then selling the property and having monthly income.

Steve M <stephen.moore[at]REMOVETOREPLYipa.net> wrote:

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Ok, so on an operating basis, you're losing money every month, and
that's before figuring for vacancies, maintence, etc.

How much will the property need to appreciate to cover those expenses?
What are the chances of that happening? Many real estate markets are
already beginning to soften.

Seems like a no brainer: Sell the property and invest the proceeds,
along with the money you're not "kicking in" every month.

Steve,

Lets break this down. You have $5k in cash (after tax) that you can
"invest" one of two ways. First is to pay down debt which has a real
rate of return of 6.125%. That rate is hard to beat at the risk level
of paying down debt (i.e. about equal to a US Tres which is around
4.5%). This rate of return will not be taxed.... Obviously... (I am
assuming you depreciate your investment property during tax season)

Your second option is to put this into a Roth IRA. The benifit of a
Roth IRA is that your money grows tax free. In most comparisons this
benifit puts the Roth in an advantaged position. However, since you
are comparing this option with paying down debt (also a tax free
event), there is no advantage there. It therefor comes down to a
question of if you think you can do better then 6.125% over the next 12
years through investment options within your Roth.

Personally I would feel very confident that I could beat 6.125% given a
12 year timeframe. Depending on your risk tollorance I would have a
mix of equities and debt securities. Moderate = 75% equities (S&P 500
ETF), 25% Debt (Bonds fund, or Tres's)

Steve M wrote:
- quote -

Steve,
From a purely investment-oriented point of view, many people don't look
to pay off rental properties in full, let alone pay them down early.
That's how you get the most out of this type of investment. Talking here
about a rental property - not your home that you live in.

So a generalized answer is that you typically would not pay down a
rental-property mortgage early...certainly not if it means giving up an
IRA contribution. Maybe your case is different though...what benefit do
you see to paying off some of the mortgage ahead of time? Do you get a
tax benefit from the rental, when you net it all out?

-Tad

"zxcvbob" <zxcvbob[at]charter.net> wrote
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What zxcvbob said (with my persnickety change in [ ] above).

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For tax year 2005, that's "$4500 if you're old enough."

For 2006, it's $5000 for folks age 50 and over.

See
http://beginnersinvest.about.com/cs/...contribution.h
tm , among many other helpful sites on IRAs found by
googling using {IRA Roth traditional contribution limits}.

Also, not sure if Steve is married or not, but the numbers
above are for one person...

Keep checking back for others' opinions. Some folks really
abhor debt and can justify this abhorrence. I represent one
member of the "do-it-yourself-investing" crowd, 20+ years
experience.

Steve M wrote:
- quote -


You can open a Roth IRA separate from your traditional IRA. You are
thinking about *converting* a traditional IRA to a Roth, or rolling-over
a traditional IRA into a Roth.

The $4000 (or $5000 if you're old enough) annual limit is across all of
your IRA's -- except maybe a SEP-IRA or some other weird hybrid
retirement acounts that I don't know about. So if you contribute $3000
to your Roth IRA, you can only put up to $1000 for your traidional IRA
for that tax year.

Bob

On Fri, 13 Jan 2006 10:05:13 -0600, "Tess Millay"
<elle_navorski[at]earthlink.net> wrote:

- quote -

Thanks Tess. This brings up another question though. My current
IRA's are the traditional type. Can I start a Roth IRA and still keep
my current ones? I was under the assumption I would have to cash out
my current IRA (pay the taxes) before starting a ROTH.

I would put it into a Roth IRA, because
--I feel the return from the stock market will be greater
than the interest rate of the rental property mortgage
(that's a rough rule of thumb)
--the rent is covering the mortgage. Also, rent can rise in
proportion to what everyone else is charging for rent. Your
mortgage payments stay fixed (assuming you have a fixed rate
mortgage).
--If you change your mind next year or anytime in the coming
years, you can withdraw the Roth IRA contribution (but not
its earnings) and still use it to pay down principal.
--IIRC, this "business interest" is potentially at least
somewhat deductible on Sch. A, right?

Normally, I would be more inclined to get rid of the debt as
soon as possible. But this being an investment property that
is doing well under your current plan, I'd let it be and
grab the advantage of a Roth IRA.

I currently owe 30k on a piece of rental property at 6.125. I have 12
more years on the mortgage. The rent pays all the interest and a
little toward the principal. I have to kick in around 100.00 a month
for taxes and insurance though.

I have 5k that I can either use to pay down the mortgage or partially
fund my wife's and mine IRA.

I would appreciate thoughts and opinions of what would be the best
strategy.