Hi Mustachians,
I'm new here and I was looking for some thoughts on what to do next to get me closer to financial independence.
I'm 35, I'm married, no kids. We live in London, England where there is public transport everywhere so we do without cars. We bring in about £5700 a month between us. We spend £2200 on mortgage, bills, transport, phones, food and keeping the house running and a further £850 paying into my personal pension and overpayments on the mortgage. Our bills are really nice and tight, I always have my eye closely on these and switch everything to the new best deal when intro rates run out. I have recently got rid of cable tv, our broadband costs us £2 a month! Our non-mustachian traits are having a cleaner (£130 a month), taking the train/tube to work instead of biking (we live 6 miles and 8 miles from our jobs but its a very busy and hectic city to ride in, bikes are also trouble to store in small London houses). And we buy food at work rather than make it at home, about £5 each per day (5 days a week for me, 3 for my wife).
My company also pay in approx. £500 a month into my work pension. The mortgage has £165,000 left to go and the house is worth around £530,000, approx. double what we paid for it 6 years ago. Interest rate is fixed for 5 years at 2.18%, well it will be once the new mortgage kicks in around a week or 2. It's currently 2.59% but can go up with interest rate rises.
We have no other debt apart from the last months living expenses on CC which we pay back each month (cashback card) and my wife's £3000 student loan which at her current repayment rate (9% of gross salary over £15k), will never be paid back and will be cancelled in about 2030, so no point repaying it.
We have about £53k in cash and shares.
Up until one week ago we planned to spend all of this and borrow another £10k on 0% credit cards building a large extension on the back of our house. But after I let the Mustache into my life we've now decided to scale this back and spend around £25k doing a simple version instead. We have to do something as the back of the house is in a bad state of repair. The rest of the house is very nice, we've spent a lot of time doing it up. We do all our own repairs and renovations.
So we will have about £30k left once the extension is finished.
I want this to work as hard as possible for me to start building the stash I need to retire on. My original plan was to pay down the mortgage and then build the stash, but I think retirement will come quicker if I invest it. Up in some parts of northern England houses are still cheap but can be rented for reasonable sums. I've seen small rundown 2 bedroom houses go at auction for less than £25k. You can do them up for 5-10k and let them out for £300+ a month which is a great yield.
Should I do A, B, C or D?
A) Pay my savings into my mortgage and then overpay it as much as possible over the next 5 years until it is paid and then build my stash. I have early repayment penalties but I could save it in something else and then use it to pay off the mortgage after 5 years.
B) Buy a cheap house as above, do it up, rent it out and collect the income, save that income plus some of my spare monthly money to build up again and repeat and repeat until my rental income exceeds my expenses? Probably need about 9 of these houses in total which would take me about 9 years until FI.
C) Do the same as B) but buy 4 houses and pay down 25% deposit on each and take out 4 mortgages for the rest. Mortgage set ups cost around £1k each here. Putting £30k deposit on a £120k house doesn't get the same high yield in this region for some reason so that isn't really an option.
D) Put it into a tax efficient investment and buy some tracker funds etc?
By the way I would live approx. 200 miles from the rental houses. I wouldn't plan on visiting them often as I work 5 days a week but I have a brother-in-law up there who is starting out in property dev so he will most likely help with maintenance for me for reasonable fees.
Any help greatly appreciated! Many thanks,
James