I got a loan from a lender real estate at 12% but found a new lender at 9%, should I pay this off?

Good question.

This question depends on some factors. Aside from the obvious economic benefits of paying the loan off and replacing it with cheaper money, you need to think more about the relationship with the lender that loaned you the money at 12%.

Rather than paying this loan off you should go find another asset that you can purchase for less than market value and purchase that asset using that lender’s 9% money. That way you can obtain more equity when you make the acquisition and have use of the money on two different loans.

You also need to be considerate of your lender that gave you the 12% money and think about leaving that loan out a bit longer so the lender makes more money on you. That makes it easier to get another loan compared to borrowing at 12% for a couple of weeks then replacing the financing. That just wastes everyone’s time.

Focus on buying assets for less than market value and don’t waste a lot of time trying to replace 12% money with 9% money. Sure, if you have millions in loans out it might be worth your time to think about this but if you are a new investor, it is more important to keep good relations with people.

From that question it is clear that you are thinking about this the wrong way. If you are investing alone, then you need a mentor. It is so critical as a new investor to have a mentor help guide you and keep you from making a lot of mistakes.

Many new investors don’t know what they don’t know and when they make mistakes it can be very damaging. In general, wasting a lot of time looking for cheaper money is not worth it. Focus on purchasing new assets that have equity and use new loans (ideally at lower rates) on those acquisitions.

Before you do any investing you should invest more time and money in your financial and legal education. I offer education and training to landlords, engineers, doctors and dentists, and many others that would like to learn how to enjoy the benefits of investing as quickly as possible. If that sounds interesting contact my office by going to www.benjaminzmiller.com and fill out the contact form.

You also can register at meetup.com at the link below:

https://www.meetup.com/benjamin-z-millers-investor-networking-group/

I hope that helps and good luck with your investing!

Benjamin Z Miller
www.benjaminzmiller.com
1-817-203-4160
ben@benjaminzmiller.com
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