In my last update I mentioned getting an additional $100/mo for a total of $1000/mo rent on this condo unit. The unit is above the break-even point with payments of principal higher than the negative cash flow but the negative cash flow still bothers me.
I had been tossing around the idea of a third property. However, I realized that I can now pay off PMI from the FHA loan on my condo unit.
According to FHA, you have to have 78% LTV in order to get rid of PMI. You also have to have 60 months worth of payments. Even if you had 78% LTV then you would still have to wait. Also the value only goes off of the original appraised amount. So even if your property has increased in value then you still have to use the original valuation for the 78% LTV purposes.
The condo had an original appraisal of $119,500. So 78% of this amount is $93,210. About a month ago I decided to start paying down this debt. The loan balance at that time was $106,074.09, so I needed to pay down an additional $12,864.09 to eliminate the PMI which is currently $49.56. This is a ROI of 4.6%. This isn’t too bad and since I still have negative cash flow I decided I would pay this loan down immediately. Not to mention, that after paying this loan balance down, I will have more of the monthly payments going towards principal.
So I am on track to have this balance paid down sometime in September. After PMI is eliminated, I will again start looking at an additional property or possibly paying off this entire loan since it’s the highest interest rate of any I have at 5%. I’ve also go another investment idea that I will be posting very soon.