The journal
I Borrowed a Million Zlotys 13 Years Ago. Now I’m Almost Debt-Free. What’s Next?
Back in 2013, I took out a loan for 1 million Polish zlotys (PLN). Today, I have less than PLN 30,000 left to pay. And before the end of this year, I plan to pay off the remaining balance, a full two years ahead of schedule.
Which got me thinking.
What happens next?
Because getting rid of a loan you’ve been paying for 13 years creates an interesting problem: what do you do with the money you no longer have to send to the bank every month?
But first, a little background.
A Million Zlotys Back in 2013
It’s worth remembering that a million zlotys in 2013 was worth considerably more than it is today. That money went a lot further, especially when it came to real estate.
At the time, I owned a plot of land with planning permission. I used it as my equity contribution, and the bank gave me a PLN 1 million loan with a 15-year repayment term.
With that money, I built a property containing 9 apartments and 1 commercial unit.
That became my first RENTON. Interestingly, it’s also the smallest RENTON I’ve built so far.
Over the next 13 years, life carried on.
I developed more properties, grew my businesses, and dealt with the thousand other things that come with running companies.
Meanwhile, that first RENTON just kept doing its job.
Tenants paid their rent. The company made its loan payments. And little by little, the outstanding debt got smaller.
Importantly, the rental income wasn’t entirely eaten up by the loan repayments. After covering operating costs and servicing the debt, the company still had money left over.
Now, there will simply be quite a bit more of it.
And here’s something I’ve been thinking about lately:
Those 13 years would have passed anyway.
Whether I’d made that investment or not.
But today, I own a company with a property that’s about to be free of the loan used to build it.
The Loan Is Almost Gone. Now What?
Once I pay off that final PLN 30,000, I’ll be able to remove the mortgages registered against the individual units that secured the loan.
The company will own the property free of that debt, and its monthly cash flow will increase significantly.
So what should I do with the extra money?
I’ve been considering three options.
1. Start Taking Money Out
This is the simplest option.
Don’t change anything about how the company operates. Just start taking out the additional cash it generates.
The company has additional capital contributions from its shareholders. Under the right conditions, I can recover those funds through a formal return of capital contributions, without income tax being charged on the repayment itself.
No new investments.
No additional loans.
Just start enjoying the results of the work I put in more than a decade ago.
After all, isn’t that part of the reason we build wealth in the first place?
2. Start a Debt-Payoff Snowball
The company also owns three other apartments that were purchased using bank financing.
I could use the additional cash flow to start making regular extra repayments on those loans.
But I’d do it in a particular way.
Every time I made an extra repayment, I’d choose to reduce the monthly payment rather than shorten the loan term.
Why?
Because every reduction in the monthly payment would free up a little more cash for the following month’s extra repayment.
Here’s a simple example.
Let’s say paying off the first loan frees up PLN 10,000 a month.
In month one, I put that PLN 10,000 towards an extra repayment on another loan.
If that reduces the monthly payment by PLN 70, then in month two I have PLN 10,070 available for the next extra repayment.
And so on.
These are just illustrative figures, of course. The actual savings would depend on the loan terms, interest rates, and repayment schedule.
And the strategy only works if I consistently put the freed-up cash towards further repayments.
But you get the idea.
Over time, the company’s outstanding debt would keep shrinking, while its monthly cash flow would keep growing.
Eventually, I could reach a point where every property in the portfolio is completely debt-free.
There’s something quite appealing about that.
3. Buy More Rental Properties
The third option is to keep growing the company’s property portfolio.
I’m not talking about building more RENTON properties, though.
My property development company already handles larger projects, and I don’t want to duplicate that activity here.
Instead, I’m thinking about buying individual apartments to rent out.
The additional cash flow from the first RENTON could be used to build up deposits for new purchases, with bank loans covering the remaining costs.
Ideally, each new apartment would generate enough rental income to cover its operating expenses and mortgage payments.
In other words, I’d be repeating the same basic strategy that worked with my first RENTON.
And getting financing might actually be easier this time around.
The company now has an established track record, an existing rental portfolio, and soon, a property that’s no longer encumbered by the original mortgage.
Of course, the bank would still need to assess the company’s creditworthiness.
But there’s a downside.
Buying more properties would mean tying up a significant amount of cash in deposits.
When my rental company recently took out another mortgage, the bank required a 25% deposit.
So, for an apartment costing PLN 500,000, I’d need to put down PLN 125,000 of the company’s own money.
And that’s before transaction costs or any potential renovation and furnishing expenses.
That money wouldn’t disappear, of course.
It would become part of the company’s property assets.
But it would no longer be cash I could freely use.
So, on the one hand, I’d be growing the portfolio.
On the other, I’d be reducing liquidity and taking on more debt.
Which is slightly ironic, considering I’m just about to finish paying off a loan that’s been with the company for the past 13 years. 🙂
Or Maybe I Don’t Have to Choose?
There’s also a fourth possibility.
I could combine all three approaches.
Take some money out of the company, use some to make extra loan repayments, and set the rest aside for future property purchases.
Or I could simply let the cash accumulate for a while and wait for a genuinely good investment opportunity.
When I borrowed that million zlotys back in 2013, my main concerns were how to get the building completed and make sure it would generate a decent return.
Today, I’m thinking about what to do with the money that same building will generate once the loan is gone.
Not a bad problem to have. 🙂
What Would You Do in My Shoes?
I haven’t made up my mind yet.
Should I start enjoying the wealth I’ve spent years building?
Focus on paying off the company’s remaining loans?
Or use leverage again to buy more properties and keep growing the portfolio?
Every option has its advantages.
But every option also means giving something else up.
If you were in my position, which route would you take, and why?
I’d be particularly interested in hearing from people who invest in rental properties and have faced a similar decision.
Or perhaps there’s another option I haven’t even considered.
Let me know in the comments.
I’d love to hear your thoughts!
Piotr
Rozsądni Bracia
WOW, I want that too…