The Money Mustache Community

Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: SDH on June 12, 2017, 11:01:23 PM

Title: New to MMM and this many questions!
Post by: SDH on June 12, 2017, 11:01:23 PM
Anyone willing to take the time to hash out some details with me? Give me your 2 cents on a few things? 
I'm so sad it has taken me this long to find this!  I've always been relatively thrifty and have often thought of our retirement years and had always sorta planned on at least 55 yo bUt I'm hoping we can do it sooner!  Even if it means one of us just works part time or PRN. 

First off, I suppose I should fill you in on our situation...

2 rental properties: One is worth ~180-190K Owe ~86K  Paid 125K Rent 1400/mo (the "worth" comes from zillow and is approx. and not to far off as I know the market here in Austin/round rock fairly well)
                              Other is worth ~250k HELOC on it is 36K but the house is pd off  Pd ~167K for it initially Rent is 1700/mo
Primary home is worth about 305-312K and we still owe ~271K so the pmt is about 1870/mo

My questions around the house situation is we aren't counting anything as income really since we still owe money on them.  So the 1700 I get for the one gets paid on the HELOC, less ~600 to cover the tax and ins that is due at the end of the year.
The other has a mortgage of 955/mo(escrowed) which we get 1400 for rent so I just send it all to the mortgage to pay extra.  What would you do?  My thought is pay them off as quickly as possible then throw that money at our primary or buy another rental later.

both cars are paid for and kinda old so will need newer ones eventually  We aren't the type to bike so I'm gonna be realistic about us and we don't always like to do the same things so it's good for us to have our own transport  but I'm cool with older and cheap!

We are in our mid 40's
We have no other debts/kids
We pay for life ins-I feel we shouldn't be doing this at this point.  Would you agree?  Add this money to pay into the Roth IRA's?  We currently aren't adding any money to the IRA's due to the houses but I feel we can do better once I get a grip on the spending, which we are pretty thrifty overall.  So I think...
I just learned that our American funds Roth's are kinda expensive and we should probably move them.  Where would you move yours too?  There's a total of about 88K between the 2 plus about 17K in a money market acct we have with them too. Would you put it all in the vanguard index fund as a roth?

Do you add the equity you have in your home as part of your early retirement money?  You can't use that money to pay bills or groceries, so I don't understand that.  I get that it applies to your total net worth but I wouldn't calculate that equity as part of my money to live on if I retire early fund.  Maybe once pd for we can use the rents, less expenses.  would you sell one and dump it all into a fund of some kind?

I'm so not clear on how the dividends affect taxes on young retirees.  I have a lot more investigating to do on that front.  But for now I just need to figure out where to put the money and learn how it all works.  So I"m sure I'll have more questions later.  I'm seriously hoping in the next 5 years we get it worked out!!!  Does that even sound doable to you?

I can't say thank you enough to whoever takes the time to read my ramblings.  my mind is racing!


Title: Re: New to MMM and this many questions!
Post by: MDM on June 13, 2017, 01:32:47 AM
Welcome to the forum.  Up to you, but if that is your real name you might want to change it (see Profile>Account Settings).  Anyway, ...

...there are at least a couple of posts you might find worthwhile:
- How To: Write a "Case Study" Topic ('case-study'-topic/).  Do fill out the spreadsheet, whether you choose to post that or a summary of what it tells you.  At the very least you can explore the effect of dividends on your taxes, given your other income, but it can be helpful in other areas too.
- Investment Order (

The above may answer some questions.  It may also prompt new ones.  Take a look, and come back with more as needed.  Good luck!
Title: Re: New to MMM and this many questions!
Post by: former player on June 13, 2017, 02:33:06 AM
I agree with MDM: the posts referenced will provide a logical framework for you to think about your situation.

The thing that occurs to me is that while you seem to have done well with your real estate rentals you seem to have a very low risk tolerance for mortgage debt.  If you were treating the rentals as a rental business with maximum financial efficiency you would be paying the mortgages as due but not putting extra to them, and putting the extra either to your own income or to further rental purchases or other investments.  This does of course involve carrying sufficient insurance on the properties and carrying a sufficient balance in your rental accounts to cover voids, bad tenants and maintenance/refurbishment.

Personally I can see the attractiveness of paying off the mortgages (I have two paid-off rentals myself).  The real estate gurus on this forum would tell both of us otherwise.  I think you are doing well enough that either approach is fine, as long as you understand what you are doing and why, and are comfortable with it.
Title: Re: New to MMM and this many questions!
Post by: marty998 on June 13, 2017, 06:10:39 AM
Do you have an idea of what your living expenses are? How high your expenses are determines how big a stash you need.

We have no other debts/kids

The phrasing of this is interesting...
Title: Re: New to MMM and this many questions!
Post by: SDH on June 14, 2017, 10:51:15 PM
Meaning we have no credit card debts, car debts or children to pay for.  the only debts we have is a 36K heloc , 2 mortgages 1 at 86K and 274K. 

I'm really working on narrowing down our actual expenses.  Roughly 3k/mo but I think we can do better
I did see that "how to write a case study" after the fact so I'll go delve into that soon. 
Title: Re: New to MMM and this many questions!
Post by: marty998 on June 15, 2017, 07:24:44 AM
I know what you meant

Just found it funny that "kids" were juxtaposed with "debts" ☺
Title: Re: New to MMM and this many questions!
Post by: SDH on June 15, 2017, 02:12:11 PM
haha, kinda the same to me :)  (i kid, i kid)
Title: Re: New to MMM and this many questions!
Post by: ysette9 on June 15, 2017, 02:31:08 PM
Yes, get out of America funds and over to vanguard. If you are paying more than about 0.15% expense ratio then you are paying too much.

How much do you have of invested assets outside of real estate equity? How much do you save each year? How much do you spend? These answers will all come out of the case study spreadsheet and allow us to give you meaningful help.

If one of you kicking the bucket now would mean a drop in your accustomed life style due to loss of income, keep the life insurance for now. Make sure it is term though; you probably don't need a full life policy.