Investigating Strategies

[MJ]

Hi. New member here. Been reading MMM for a couple of months and just got the wife on board. Here's our dilemma.

We currently save about $2500 per month after all bills paid (this includes wife and I working as well as rental profit from 4 rental houses). Currently sitting on $50,000 ready for investment SOMEWHERE.

Home mortgage balance $230k at 4.25%
Rental 1 mortgage balance $50,048 at   6.250% and provides $3,013 annual profit
Rental 2 mortgage balance $44,907 at   4.625% and provides $5,982 annual profit
Rental 3 mortgage balance $67,641 at   5.250% and provides  $6,602 annual profit
Rental 4 mortgage balance $74,905 at   4.000% and provides $5,917 annual profit


Option 1: We could throw extra money at home mortgage and pay it off in 5 years or so

Option 2: We could throw extra money at each rental until paid off to increase cash flow.

Option 3: We could purchase another rental to increase cash flow. It would likely provide $5k - $6k per year.

Option 4: We could begin putting money into Vanguard index fund.

I can't decide what's the best return for my mone/best way to get us retired ASAP.

Any help or advice from the experts around here are welcome!

[MJ]

Thanks for replying, lhamo.

-We've got a $50k emergency fund.
-We've got $150k or so in 401(k)s
-The rentals are our retirement plan. In 30 years, they'll all be paid for and provide a nice income. Now I'm antsy and don't want to wait to retire. I never intend to sell a rental.
-We'll refi the high interest rental if we don't pay if off.

Will consider refi on home loan, too. Unless we just pay it off in 5 years.

[gooki]

My advice, assuming there is no PMI on any of the mortgages, and they each have the same tax advantages.

First pay off Rental 1. Then refinance the mortgage on your home. Saving 1% on a 230k mortgage provides a gain of $2,300 a year. Use the extra cash flow to pay of rental 3.

[aj_yooper]

This is a naive question as I don't have any rental properties.  But...  If you are actively managing your rentals, can you do a SEP and put cash there?

[happy]

Llamo, I was thinking the same thing :)

[nktokyo]

I would pay off the $50K mortgage on the rental with the highest interest owing. 6.x% is a good return on your spare cash and from experience it feels totally badass when you start owning rentals freehold.

[MJ]

Thanks everybody...

I know nothing about SEPs. Guess I need to do some research on that. We do manage the properties ourselves.

Let me see if I can attach something...