Author Topic: I'm at a crossroads...  (Read 3672 times)

txcat84

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I'm at a crossroads...
« on: May 04, 2015, 10:11:36 PM »
I'll try to keep this succinct, but I'm at a crossroads. First time poster so go easy on me, Stache Army:

- Bought for 270k @ 4.25% in 2012. Currently valued at 325k, could probably get 300 if I sold. Remaining principle=100k

- Was living in home happily paying off mortgage with mad intensity. It's just one of those leviathan things for us. Job recently sent me to Lafayette, LA for a two year stint.

- We're living cheaply and renting home out for $2500 (mortgage is 1700). No reason to think the home will ever fetch less than 2200 considering where it is.

- Am getting a 65k bonus in June (after tax), hence us asking how high when they asked us to jump to Lafayette. Herein lies the question/options:

With 65k:

1.) Pay off rental property mortgage this year or get close, start saving like crazy for our next home where our children will grow up (would like to be in our home for the future while maintaining the rental property in approximately 3 years)

2.) Put it aside until we are ready to move while stacking more on top for our next DP. Letting renters cover mortgage, pretending it doesn't exist aside from maintenance.

3.) Combination of two.

4.) Sell rental and pay cash for next home (don't prefer this as I like the idea of having a rental in the portfolio, especially one kicking 2500 out and appreciating quickly)

5.) None of the above

No debt. 1 yo child. Total takehome = approx 7500/mo.

txcat84

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Re: I'm at a crossroads...
« Reply #1 on: May 05, 2015, 10:23:28 AM »
Anyone have any input? Am I way off base?

JLee

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Re: I'm at a crossroads...
« Reply #2 on: May 05, 2015, 10:25:11 AM »
Hard to answer without the big picture goals in mind. Are you planning to retire early? If so, how close are you?

plainjane

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Re: I'm at a crossroads...
« Reply #3 on: May 05, 2015, 10:29:43 AM »
In general, it looks like the rental is working well for you, as long as management makes sense within your life, I think you should keep it. 

For the 65k:
Are you maxxed out for your tax-advantaged savings?  What is your stash like right now?
Do you have an emergency fund?  Is it big enough?
Given what you have said, I think putting this aside as your DP and continuing to save against that is your best approach, but many of these look fine.

Thegoblinchief

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Re: I'm at a crossroads...
« Reply #4 on: May 05, 2015, 10:34:20 AM »
Speaking of taxable accounts, I do hope you're maxing all available tax-deferred options?

On the house, are you going to ever move back there? If not, you're getting a poor return on the underlying assets (grossing less than 1% of house value per month) and should get it working for you in the market. If you may move back there, it's cash-flowing nicely for now, might as well hold onto it.

txcat84

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Re: I'm at a crossroads...
« Reply #5 on: May 07, 2015, 11:46:43 AM »
Tax deferreds nearly maxed. Ample emergency fund. Will probably move back in once mortgage is paid off.

Goal is certainly early retirement, or at least as early as possible.

MustacheNY

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Re: I'm at a crossroads...
« Reply #6 on: May 07, 2015, 12:22:42 PM »
It really is impossible to give you definitive advice without a clearer picture of your entire income/expenses, complete savings, retirement goals, etc.  All of the choices you mentioned could be potentially good, but without more information it is really tough to give you specific advice.

However, A property that is yielding ~7% that is also growing with inflation as rents rise, and that can give you capital appreciation seems like a pretty good idea to keep.  If that house is paid off, and you can pay off the new house you are considering purchasing in the next few years, then not even counting any retirement investment accounts, taxable investment accounts, or pensions you may have, you could be very close to being ER'd just off of the cash flow from the house, depending on your level of expenses.

As far as whether to pay off the current house or put the 65K into investments or a bigger DP on the new house....  There is really not too much of a difference from a financial perspective between putting the 65 down on the new house or the old house.  Since, you can not invest aggressively in the stock market with such a short holding period between now and the purchase of the new home, I would say that putting it down immediately on the old home would make more sense than waiting to put it towards a down payment on the new home.  The choice between putting the 65K towards longer term investments is a more difficult decision based on risk tolerance and expectations.  For me personally, with the market feeling a little toppy after a 7 year bull market, I would probably err on the conservative side and pay off the debt even if it is a low interest rate.

Again, it would be more useful to have a full picture of your situation, but this would be what I would recommend based on the information you provide.

txcat84

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Re: I'm at a crossroads...
« Reply #7 on: May 09, 2015, 12:22:17 PM »
Thx everyone!

Calvawt

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Re: I'm at a crossroads...
« Reply #8 on: May 09, 2015, 01:28:01 PM »
if the mortgage is covered by that wide of a margin, i would look at other investment options like another rental.  If you don't want to go that route or really don't like carrying debt pay it off!  I don't think there is a wrong answer (except buying a boat and jetskis with it).

Rubic

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Re: I'm at a crossroads...
« Reply #9 on: May 09, 2015, 04:56:52 PM »
Is refinancing an option?  4.25% in today's market seems high.