A little background about why I am asking the community for help: We just had our little baby boy earlier this year, and we've decided that my wife will stay at home to look after him after my paternity leave is complete. This means we'll be transitioning from a dual to single income household. Now, I've already prepared for this in that I rent out 4 homes for residual income to help supplement. Based on current expenses, and thankfully there aren't too many, it's very possible for us to live off only my salary and still put some away. The rental income will in most cases not need to be tapped unless we run into a huge expense; and in addition we also have a reasonable amount of savings to work with that will last for approximately 8 months.
My question now is...instead of leaving the net rental income in checking or savings, should I use the proceeds to proactively pay off the principal or invest in a total market index fund (whether in Roth IRA or regular brokerage account)?
Here are some stats on the properties, which show current principal balance and monthly payment:
- $273,084.95 @ $1506.81/month, 3.99% APR
- $91,598.00 @ $508.88/month, 4.125% APR
- $85,046.77 @ $527.43/month, 5.00% APR
- $64,112.44 @ $420.62/month, 5.125% APR
After all expenses and contingencies factored in, my monthly net income is $1822; again assuming no major catastrophes. Each year the income does go up because rents have been increasing steadily at about 8% per annum.
Any suggestions on where I should park the $1822 earned each month? At first I thought paying down the properties so that I can have access to extra cash flow much earlier. My mind wouldn't allow me to stop there, so I thought maybe I should invest the money in a total market index fund instead. Now I can't decide.
Thoughts? I realize some extra data points that I am not aware of may need to be stated here. Please let me know what else might help. Thanks in advance...I appreciate everyone's input on this.
Just an FYI, I'm not worried about a retirement account. I have enough money socked away in 401k and IRA that will give me plenty to retire if I so happen am forced to work full time until 60 (which I don't plan to).