Hello,
I've been in the process of trying to buy my 2nd rental house paid in cash, but with the market having turned into a sellers market, I've been priced out. At my savings rate, I could wait a few more months, and buy, but at a higher price. Even at the current prices, the cap rate is below 9%, and that's for a paid off rental!
In any case, I have a rental already that I paid for in cash at the bottom of the market and have owned for several years but only a year as a rental after I moved into my new house. My primary residence is considerably more expensive but mortgaged (lost money in the stock market speculating, so I didn't have enough cash to buy this house paid in full).
I am now considering what to do with the money instead of buying another house. I'm currently all in real estate, so diversifying comes to mind. Thing is, I used to do well in the stock market, but lost most of my modest portfolio by speculating in the end. So I have stayed away from picking individual stocks. If I get back into the market at all, it will be index funds or dividend stocks.
I could use cash on hand to pay off my student loans entirely (30K, half at 2.3% interest and the other half at 6.8% interest. This would increase my savings rate from 53% to 63%. All I would have for monthly living expenses would be easily covered by a security guard job if it came to it (I'm an IT guy and make six figures, just saying though, I could coast once I do this, if I wanted to).
Of course after paying the student loans off I would still have a hefty rainy day fund and investing fund. My savings rate increases by doing the above, and I could build on the existing cash enough to pay off the mortgage in one year. It would currently take me 6 more months if I decide to pay off the mortgage instead of the student loans. Paying off a house in the next 6 months seems like a smart move, but I would be cash poor and have limited flexibility, where as paying off student loans leaves me with lot's of cash for emergencies or investments..
Once the mortgage is paid off, my savings rate goes to 85% and I could literally retire (between the rental house and two room mates in a paid off giant house with lot's of space I don't use, I'd have cashflow 2x my living expenses, without working. I'd also hold a large dollar ammount in assets.)
This seems to be a good path to ER, not to mention building assets, with little risk. Alternatively I could keep saving until the summer and then pay off the house, then it will be a few more months after that before I save enough to pay off my student loans. But I figure I can take care of the student loans now since I have cash to cover that and still have a nice emergency/investment fund should the right opportunity come along, all the while being able to retire in a year.
Alternatively, I could just stick the money in an index fund and risk losing it all. This would force me to keep working high stress/high income jobs to start over.
Of course if I pay off my student loans and my house in the next year, I'm still not likely to actually retire, even though I could. I'm only 31 and just graduated from college in 2009. I'm willing to work a few more years to put a few hundred thousand in the bank "just in case". But I'd rather have the option to retire than be forced to keep working knowing all the while that I have to deal with the BS because I lost it all in the stock market...again.