Topic Title: Two Houses, Zero Clues
Life Situation: single, zero dependents, Bronx/NYC, 38 yo female
Gross Salary/Wages: $100k (plus discretionary $50-70k)
Individual amounts of each Pre-tax deductions
401k – $1,500/month average - no match offered so max out as quickly as possible (90% of paycheck in Q1 goes straight to 401k) – maxxed in 2016 and 2017
HAS – none offered
FSA - $10.41/month ($250/year total as have very low medical expenses)
IRA – none (would love to know what a back door IRA is)
Health insurance – none, premium covered by company
Other Ordinary Income: none
Qualified Dividends & Long Term Capital Gains: none (tbh I don’t know what this means)
Rental Income, Actual Expenses, and Depreciation: unsure how to calculate this (the 1st house is my primary home (a studio) and the 2nd house is for my mother to live in—I pay the mortgage, she pays everything else)
Adjusted Gross Income: $157k
Taxes: TBD
Current expenses in a normal month:
Mortgage 1 (my studio) $1,125/month
Mortgage 2 (mom’s house) $1,250/month
Insurance studio home owners $27/month
Insurance mom's home owners $88/month
Insurance car $166/month ($orig 171/month - ditched road side help and rental car coverage)
Car $265/month
Bridge tolls $350/month
Gas $100/month
Other transit $25/month (subway, taxis, Lyft)
Electric bill $35/month
Entertainment $155/month (misc drinks, dinners)
Hobby $150/month (horseback riding, surfing lessons; orig had $300 for this...will cut it down for the next fews months)
Food & Dining & Groceries $250/month (originally thought $400)
HOA $750/month (co-op maintenance - not a typo!)
Phone $30/month (orig $80)
Hair $50/month
Wax $25/month May-September (originally year round - did a winter of shaving since I'm not at beach)
Gym $35/month (orig $50/month - called to "cancel" and got lower price!)
Storage unit $175/month (living in studio makes it hard to store bikes, surf board, horse riding gear…have considered giving up the unit it but unclear where I would put the items and use most of them seasonally) (got on wait list for smaller unit--will consider moving locations if one doesn't free up in October)(cleaned out storage locker in December 2017 - will see if keeping gear in my apartment works out)
Cable/Internet $0 (use Amazon prime video, mooch friends’ HBO GO)
Student loans $0 (paid off three loans over 10 years as scheduled with original borrowers)
401K $1500/month
Expected expenses:
2018: new running shoes, surf board storage rack, travel
2017: lots of weddings this year + family reunion + two 1 week vacations meant a lot more spent on travel this year than normal, though travel is where I splurge most years
ER expenses: unsure
Assets:
As of 12/31/17 checking cash balance $7,848.96
As of 9/6/17 checking cash balance $31,817.13
As of 12/31/17 savings cash balance $44,699.67
As of 9/6/17 savings cash balance $32,938.44
As of 12/31/17 401k balance $87,967.02
As of 9/6/17 401K balance $70,656.71
House 1 estimated value (my studio ) as of 12/31/17 $200,000 (down from 9/2017 $215,000)
House 2 estimated value (mom's) as of 12/31/17 $155,00 (down from 9/2017 $165,000)
*I used two large chunks of cash as down payments on properties, one in 2016, one in 2017 so my current savings seem low to me compared to my salary vs monthly expenses. I expect my savings to increase fairly rapidly in the remaining months of this year.
Liabilities:
Car $260/month (balance of $15,963.27) / 3.990% APR (just bought a used car)
Mortgage 1 (my studio) $1,125/month (balance of $147,996.12 @ 3.250% FIX)
Mortgage 2 (mom’s house) $1,250/month (balance of $138,270.22 @ 3.875% FIX)
*need help with what PITI is (specifically where to find the taxes etc)
Specific Question(s):
Real estate: what advice can you give on owning two properties, tax advantages, things to be aware of?
For context I bought my first apartment in March 2016. I bought a second home for my mother to live in in May 2017. (I pay mortgage, mom pays all other expenses.) I have had no examples of home ownership in my family so am clueless about the benefits of having a mortgage. TurboTax was pretty straightforward this year because I only had the one apartment…now I will have two properties. My mom needed help and I was reluctant to give her cash so decided to buy a house in the state where she lives. It’s been a few months and is going smoothly. She knows I may need to sell it if my financial situation changes; I know she may not want to live there indefinitely. Having this additional mortgage has made me want to get a deeper understanding of my finances.
Accountant: should I hire an accountant to do my taxes?
Taxes are my biggest weakness (aside from the general ignorance of finances in general). I’m considering hiring an accountant. I work in NJ, live in NY, plus NYC taxes…and now two properties in two different states. I just don’t feel like I have expertise in this area (taxes, specifically; real estate in general).
Cash: Should I pay off my car? pay down a mortgage? open a Vanguard account?
I feel like I have more in cash than would be necessary for an emergency. Would you agree?
How much should I have in an emergency account in my situation?
[Added later: I determined $11,424 would be an emergency fund that would cover three months]
Backdoor IRA: what is this? I’m still vague on Traditional vs. ROTH IRAs.
Clarifying my goals: I would like to continue working for the next ten years then have a tiny house on the rural outskirts of a bigger town, preferably also near the sea. What should I be concerned with now in regards to that goal? Any towns to consider that have equine communities and surfing? Traveling is also something I anticipate continuing to spend money on.
To clarify my end goal: I’d like to live in a tiny house in the rural outskirts of a larger city, not the suburbs. To me there is a difference. I do not want to live in the suburbs EVER. Perhaps further up/across the Hudson Valley (near NYC), south Jersey (near Philly), Oregon (near Portland)…would love input on people who live near a big city and still take advantage of it.
Looking forward to the punches! I'm ready!
Thank you x1000!