We have a house, a rental, that was purchased 3 years back during my time working away during the mining boom here in Australia. When I refer to purchased I really mean scraped together a deposit and when I say house well its more of a caravan with an annex but the land itself is included. The bank owns most of this property and it has been stuck on a variable 3-year interest only loan with a rate 2% higher than it really should be (due to property type) which has just rolled over this month actually to principal an interest.
For all it’s apparent strangeness in the eyes of lenders, it is positively geared, meaning the rent covers the mortgage and related expenses.
Originally I thought that the heading of this post would make a great book title later on down the track. An entire house paid for by the combined might of a steady rental tenant supplemented by a cascading stream of side hustle cash from selling books on eBay.
Initially, in the early days of ownership, this seemed like a perfect plan. I had a great tenant and I was finding (and still do) books for 50c and flipping them for $50 and more in some cases.
Unfortunately those profits at the time went elsewhere and the time lapse between windfall sales and the low(er) margin on more frequent book sales made me realise that to have any hope of actually achieving paying this house off with the assistance of eBay (anytime soon) I really needed to sell other item types and expand my knowledge and areas of expertise to facilitate this. I needed larger $ value margins and returns and so this is what I have started working towards from July. Getting more items listed across more categories.
When I decided to really have a crack at growing this eBay business in July we had paid $0 off the actual mortgage itself (everything prior being interest only).
Why is all of this relevant?
Well, you have to start somewhere. As of right now after 2 months of eBay contributing additional income into this properties mortgage, we currently have paid off 1% off this house already. Paying off this house seems like a logical place to apply the proceeds of the eBay business with every dollar applied to be worth more than its face value (due to interest being saved over the long term). Some of the more advanced investors may argue that I am actually reducing my returns by doing this (with available deductions of interest quickly falling away) but I feel like this is the place best suited to track progress.
After this house is paid off the free cash flow generated can then be used for any number of things, investment, subsidise a mortgage repayment, etc… Perhaps I could buy another unit and pay that one off twice as quick.
What’s the goal?
For now whilst still working in a full-time role the monthly goal is to create $200 of free cash flow which can be applied to this property. I have set this goal fairly low on purpose due to this being a growing business and certainly, for the first few months, I will be looking to pour the majority of the profits back into business growth and thereby increase future revenue.
At $200 extra per month, I would save $53,757.59 in interest over the course of the loan and 12 years and 2 months in time.
Later I will look to ramp this goal up towards $200 per week instead of per month.
At $200 extra per week, I would save $84,497.81 over the course of the loan and 20 years and 3 months in time.
It is amazing how every little bit adds up and compounds very quickly. There is still a long way to go but I see this as a useful way to track progress and create motivation to keep going. After all staying consistent is the key.