Buman, an Iowa State graduate who now manages a call center, comes from a family of strivers. His great-grandfather emigrated from Germany and started the farm in Harlan, Iowa, where Buman grew up -- and where his uncles and grandfather still raise 2,000 head of cattle and 1,000 acres of corn. (His dad went into banking.)
From the outset, Buman focused his real estate interests on a few small towns surrounding a retail distribution warehouse and a trucking center, about 25 miles from Omaha. The Omaha/Council Bluffs, Iowa metropolitan area had an unemployment rate of 4.9 percent in June, which explains how Buman managed to rent both homes five hours after listing them.
"There's a lot of employment -- services, farming, cattle, railroads, stores -- it's not hard to get a job here," says Buman. "A lot of employees want to be close to work and the cost of living in these little towns is next to nothing."
His first purchase was a two-bedroom, 900-square-foot home for $24,000. He invested $5,000 in repairs, rented it for $550 a month, and has already paid off the mortgage. Buman followed up with a four-bedroom 1,500-square-foot home. He paid $34,500, invested $7,000 in repairs and rented it for $700 a month. The home still has a mortgage balance of $16,500 at 5.5 percent.
Last fall, Buman and his college sweetheart, who are marrying later this month, bought a three-bedroom ranch 10 minutes from Omaha for $185,000. It's close to family, and to the University of Nebraska Medical Center, where Valerie begins her residency next spring.
The home has a 30-year, fixed-rate mortgage at 4.25 percent, and a balance of $168,000. When the balance on the loan falls below $148,000, the couple can stop paying mortgage insurance, which costs $94 a month.
Buman's question: With his extra $20,000, should he pay off the mortgage on the rental property? Pay down the single-family home to eliminate the mortgage insurance payment? Or consider another option?
See the full story at Daily Finance.
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