Executive Summary: I need help deciding where to focus my investment dollars in 2016 and 2017. I feel the housing market is about to encounter one of its cyclical 10-20% downturns, and I'd like to take advantage by investing in a rental property that will continue to produce passive income for when I retire in 10-15 years (sooner if possible).
The details:
Vital Stats: 35, with no plans for kids. DW works seasonally as a Tax pro, which covers any vacations or family visits
Occupation: IT Manager for a mid-sized business in a LCOL area
Income: $135k + up to a 30% bonus based on personal and company performance. Likely to only get paid out at 10-15% instead of 30% as market share slowly erodes to companies like Amazon.
Vehicles: Paid off. Both are likely to last another ~5 years
Existing Rental: I have an existing rental with a 7/1 ARM (refinanced 2015), that I am applying ~$1300 extra to principal each month. The goal here is to have it paid off in 2023, by the time the ARM adjusts. Interest rate is at 3%. I'd love to find something like a 5-year CD that guarantees 3% or better, but haven't been able to find anything.
Tithe: $1300/month - non-negotiable.
House: $931/month in rent with a 15-year mortgage, 13 years remaining @ 3%
401k: Currently I am saving $1550/month, to max out the 401k. Current balance between my wife's previous 401k, my 401k's and IRAs is about $350k
Food: $450/month - My wife and I splurge a bit here and do as much organic as possible
Savings: $30k, of which $20k is set aside for emergencies. At this point, I am able to set aside about $1000 per month
I'd love to take advantage of an upcoming dip in the market to purchase a $250-$300k duplex, meaning the down payment would need to be a minimum of $50k plus any repair costs. I plan to buy and hold these rentals for 30-50 years as a source of income. Given that I have a sizeable 401k already and 30-years of runway ahead of me until I hit age 65, should I cut back on the contributions to the 401k so that I still get the full company match amount, socking the rest away to put towards a rental? Are there equations that I can use as a basis to compare the two options?