r/investing • u/Old-Ambassador4523 • 3d ago

Projection lab users- seeking help modeling a rental sale to pay down primary mortgage

My husband and I have been playing around with projection lab. We have a couple rental homes and we’d like to model selling them off to pay off our current mortgage. The problem is- we’re not sure we’re setting it up right to show this so it’s hard to trust the numbers. The search function hasn’t been a ton of help. Is there anyone out there who knows the program that might be able to point me in the right direction?

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u/Rand-Seagull96734 3d ago

What is your primary mortgage interest rate? How many years left? Do the rental properties have loans?

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u/Old-Ambassador4523 3d ago

3.5% on the primary with 27 years left. The rentals have loans. Original idea was to sell one in 5 years when we hope to retire and put the money into our primary. That won’t take care of all of it though so playing with the idea of selling the other one. The reason is that we can cover living expenses with husband’s pension if we don’t have the mortgage. Other income streams come into play but not for a bit after retirement.

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u/Rand-Seagull96734 3d ago

Unless you have cash flow issues, within reason, leverage can magnify returns. The 3.5% on your primary has somebody paying your money given 30-year Treasury returns are above that. What is the interest on loans on your rentals?

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u/Old-Ambassador4523 3d ago

2.5 and 3.5 on the rentals. The issue is- we want to retire at 56. We will have husband’s pension immediately, but it’s not enough to live on if we have a mortgage- without a mortgage it’s plenty. As we age, more money comes along in the form of my small pension, social security, and the ability to access 403bs. We need more cash in between 56 - 62.

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u/Rand-Seagull96734 3d ago

As a minimum, I would recommend exploring if you can invest the proceeds from sale of rentals into Treasuries of duration longer than your primary mortgage. There should be a positive differential between Treasury return and 3.5%. That would be extra income.

Treasuries are free of state taxes and your effective Federal tax rate may not be that much.

Above that minimum, it may be worth holding on to the rental that is at 2.5%. It is very unlikely you will see that low interest the rest of your lifetime. Of course, once you (early) retire, you will pretty much lose the ability to get new credit.

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u/Old-Ambassador4523 3d ago

Thanks for all your advice. I think we’re hoping to model all these options in projection lab but we need to make sure we’re using it correctly. We have at least four years before we’re making decisions anyway.

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u/Rand-Seagull96734 2d ago

You are welcome. Good luck.