Hi all. Long time listener, first time caller. Wasn't sure whether to make this a Case Study, an Ask a Mustachian, or a Real Estate post. Apologies if this is in the wrong place.
Life Situation: 25 year old male, in second year of marriage to my wife (26). We have a baby due on April 14th. Our general situation: No giant headaches (debt free), but always thought money existed to be spent. In May I discovered ERE and MMM and got hooked. I read every single article on MMM over the course of a few weeks. Successfully evangelized the DW--the environmental angle really clicked for her. We instantly started cutting expenses. We went from about 0% savings rate to about a 38% savings rate over the next month--one of the best feelings we've ever had. We have plateaued a little bit and are looking to make the next big jump.
Net Salary/Wages: $53,758 between the two of us both working full time.
Individual amounts of each Pre-tax deductions: None. Knowing very little about investing, tax strategies, etc, we have been building up cash while trying to learn.
Current expenses: Rent + utilities: $1300, Everything else: ~$1700
Assets: ~30,000 in cash savings account, $25,000 in Calvert Ultra Short Income Fund (Made up of bonds mostly--this is my wife's, was set up for her by her parents a long time ago), ~$5,000 in VTSMX (an "impulse buy" I made during my first post-MMM rush).
Liabilities: None
Specific Question(s):
On the income front, I currently make well below my earning potential--I took a job at a university in order to have the option of free graduate school. Luckily, I have found and accepted a job that will pay 65-70k. The only catch is that it is in the DC Area and will not start until around a year from now.
In terms of expenses, we know that despite our cuts that we are still sitting on an exploding volcano of wasteful spending. So we are still trying to whittle down all our categories. However, I've realized that the elephant in the room is housing. If you take our rent and utilities out of the equation, our annual spending is only around $20k per year.
Which leads me to my question--should we get rid of our rent by purchasing property in our hometown of Pittsburgh, even though we will (95% probability) be moving to DC in a year? I have no experience in this department, but here are my back-of-napkin estimates.
So between everything, we have a stash of about $60k. In our area, we could find a multi-unit rental property for 150-160k. We could take our 30k cash savings for a down payment and live in one of the apartments. This would make our housing either neutral or a source of income. This would save us about $15,600 in rent over the next year. Then when we move, we could either rent out all three units or rent out two and keep one for us as a place to stay when we come back to visit (which we would do often as both sets of grandparents are in the area). Alternatively, if I can't convince DW to move into a multi-unit rental with a baby around the corner, we could buy a single-family house and then rent it out when we move. My thinking is that then we would end up in DC with a stash still intact, with enough in it to either form the basis of our ER savings, or to be on hand for another down payment if we decide to look at property in the NOVA area.
Would any of the following be downsides? 1. All of our stash would be in real estate--risky business? 2. We would have a rental property and be a 5 hour drive away from said property. (I will be planning to hire a property management company, there is a very well regarded one in our area) 3. Is the idea of possibly having two mortgages at once insanity?
If there are any other resources you recommend as I think through this problem, I would really appreciate it. I'm in at the deep end over here--thanks in advance for any responses, and apologies in advance for lack of clarity etc!
