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Texas | sserven,
There is a reason so many articles are stating to build working capital. As we all know, current economic times are not good. Keeping the money or at least part of it in a liquid situation could keep you out of trouble in the future. Sure it would help pay down the loan and decrease interest payments, but if you have a short year and cant make the payment or you don't pay out then you have something to fall back on. If you have a good year then you can go ahead and make additional payments to principal and still have cash to fall back on.
If the amount of cash is high enough then split the money and put half in savings and half to prinicipal payments on the land. You can still reduce your principal on the land and keep some money for savings. If a good investment alternative comes along then you could use the money you have left and borrow against the land for the remainder. If not then you have cash availble if a short year comes along.
You accomplish all three goals.
1. You pay more to the land payments.(although it is not as much as you would like)
2. You increase your working capital.
3. You have funds available if an investment opportunity comes along. If you don't have enough cash then you could borrow additional funds against the land.
Spread the risk. | |
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