Author Topic: Would you house hack, pay off debt or invest?  (Read 1437 times)

ATLien_Si

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Would you house hack, pay off debt or invest?
« on: July 07, 2019, 06:43:02 PM »
29/M/Single no kids
currently renting with roommates so rent is $600/month for another 7 months, after which I will live alone for about $1300/month if I rent. If I house hack then I should be able to live for about what I pay now, but I'll be without the cash safety net.

Income $68k/yr - Net $3400/mo after taxes and retirement.

Expenses = $2200/mo (including $500/mo to the student loan payment).

Assets= $64K
$41K - 401K (Contributing 15%. Company matches 100% on first 5%)
$3K - HSA Account
$5K - Investment account (Mostly in index funds. I dabbled in stock picking early on but left that alone)
$15K - Cash on hand

Debt= $13K
$13K in student loan debt @3.5%

Which would you do?
> Pay off the debt ---> rebuild cash reserve and then consider REI or Investing.
> Use the cash for downpayment on house hack (properties range from $220-270K) ---> payoff the loan over next 2 years because interest is low.
> Invest the cash in Index Funds ---> payoff the loan over next 2 years because interest is low.

Just want to make the right move when I move from with my roommates. Maybe I don't have enough to even consider buying a property.

If I missed any important information let me know,
« Last Edit: July 08, 2019, 10:03:48 PM by ATLien_Si »

Freedomin5

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Re: Would you house hack, pay off debt or invest?
« Reply #1 on: July 08, 2019, 12:58:56 AM »
Is getting another roommate to help you split the rent an option?

You don’t have enough for a 20% down payment on a house. Have you run the numbers on the rent vs. own calculators to see whether continuing to rent is better or if owning is better?

MrThatsDifferent

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Re: Would you house hack, pay off debt or invest?
« Reply #2 on: July 08, 2019, 05:27:57 AM »
I would keep renting with roommates for as long as possible. Biggest mistake I made was living alone when my salary was less. I’d probably get rid of the student loan cause debt is horrible. Then, I’d trim my expenses and put everything into index funds, after maxing tax advantage accounts. Create a plan and stick to it.

RWD

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Re: Would you house hack, pay off debt or invest?
« Reply #3 on: July 08, 2019, 06:17:56 AM »

efree

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Re: Would you house hack, pay off debt or invest?
« Reply #4 on: July 08, 2019, 09:49:08 AM »
Invest in index funds
This. Don't prepay the student loan, 3.5% is a low rate. And don't buy a house yet, just focus on investing for now.

EngineerOurFI

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Re: Would you house hack, pay off debt or invest?
« Reply #5 on: July 08, 2019, 10:44:20 AM »
@ATLien_Si

I agree - is getting another roommate and continuing to rent an option first? 

Regardless of rent/buy -- Are you putting anything towards tax-advantaged assets (401k/Roth IRA/HSA, etc.) and (of course) investing these tax-advantaged savings vehicles in low-expense fee index funds or total market funds?  I'm concerned that you aren't putting anything in tax-advantaged assets at all since no such assets were listed?  Are you missing out on an employer match?  I noticed you had a Dec 2016 post where you mentioned some investment assets totaling $22k at the time.  Invested in S&P 500 index fund those would've since appreciated quite a lot....

Have you seen the Investment Order thread?  Feels like you're skipping a few steps by not considering any tax-advantaged investment vehicles with your spare free monthly cashflow and taking advantage of dollar cost averaging.

Link to Investment Order:
https://forum.mrmoneymustache.com/investor-alley/investment-order/msg1333153/#msg1333153
« Last Edit: July 08, 2019, 10:48:51 AM by EngineerOurFI »

ATLien_Si

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Re: Would you house hack, pay off debt or invest?
« Reply #6 on: July 08, 2019, 09:47:25 PM »
I agree - is getting another roommate and continuing to rent an option first? 

I could ask around and find a roommate. I currently live with the only 2 friends id be willing to live with out of my group. The rest are either dirty or unreliable. But these 2 are in relationships and will move with their SO.


Regardless of rent/buy -- Are you putting anything towards tax-advantaged assets (401k/Roth IRA/HSA, etc.) and (of course) investing these tax-advantaged savings vehicles in low-expense fee index funds or total market funds? 

Sorry, I was just giving a quick overview. I didn't consider my retirement account or investment accounts an option in this decision because I don't plan to touch them anytime soon.  Here is better financial picture:
Assets:
$41K - 401K (Contributing 15%. Company matches 100% on first 5%)
$3K - HSA Account
$5K - Investment account (Mostly in index funds. I dabbled in stock picking early on but left that alone)
$15K - Cash on hand

Debt:
$13K - Student Loan debt @3.5%
« Last Edit: July 08, 2019, 10:02:15 PM by ATLien_Si »

ATLien_Si

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Re: Would you house hack, pay off debt or invest?
« Reply #7 on: July 08, 2019, 09:52:57 PM »
Is getting another roommate to help you split the rent an option?

You don’t have enough for a 20% down payment on a house. Have you run the numbers on the rent vs. own calculators to see whether continuing to rent is better or if owning is better?

I've looked at the calculator and considering I don't see myself living in the home I buy longer than 3 years, it makes more sense to rent. My only interest in buying is to house hack a duplex and eventually turn it into a rental property.

 

Wow, a phone plan for fifteen bucks!