Author Topic: Pay off CC or buy first fourplex  (Read 13111 times)

MDM

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Re: Pay off CC or buy first fourplex
« Reply #50 on: July 09, 2015, 06:57:00 PM »
Based on the OP "Average net pay (over the last 10 pay periods) is $2875 every two weeks ... with 10% taken out for a currently unmatched 401k" (and noting that $2875*26/12=$6,229/mo and assuming no state tax):

CategoryMonthly
Comments
Annual
Salary/Wages$9,469$113,622
401(k) / 403(b) / TSP / etc.$947Room to increase?$11,362
Income subject to IRS tax$8,522$102,260
Federal Total Income$8,522$102,260
Federal tax$1,5682015 rates, S, stand. ded., 1 exempt.$18,820
Soc. Sec.$587Assumes 1 earner paying$7,045
Medicare$137$1,647
Total income taxes$2,293$27,512
Income before other expenses  $6,229$74,748


Filing Status11=S, 2=MFJ
# of earners1
# Exempt.$1
Total Income$102,260
Std. Deduct.6300
Act. Deduct.$6,300
Exemption$4,000
AGI$102,260
Taxable$91,960
Tax$18,820
Monthly$1,568

With that much income, the $18K/yr into the 401k should not be the majority of invested money, thus leaving much flexibility for the rest.  Of course, that assumes all the assumptions are correct. ;)

Justaerin

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Re: Pay off CC or buy first fourplex
« Reply #51 on: July 09, 2015, 10:45:28 PM »
Woah that's a pretty excellent calculator!  Whence did it come? I wish I got paid 26 times a year... it's actually every 1st and 15th, so only 24x.  I do get bonuses though, so maybe that's close to accurate still.

Your assumptions were correct for the most part. I file single, am single, no state taxes, claim zero (even so I have previously always owed). My spending is at about $29k/yr before my CC payments.  $41.5K/yr with the CC payments.

My big glaring sore thumb right now is that housing expense.  I want to either reduce it with a roommate or turn it into an investment with a fourplex.

MDM

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Re: Pay off CC or buy first fourplex
« Reply #52 on: July 09, 2015, 10:47:55 PM »
Woah that's a pretty excellent calculator!  Whence did it come?
The template is all yours for the filling in.  See http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228.

Any questions/suggestions, just ask/suggest.

K-ice

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Re: Pay off CC or buy first fourplex
« Reply #53 on: July 10, 2015, 12:18:04 AM »

It really highlights how unimportant "things" are, and how important freedom to go experience the world is. 


As most said get rid of the debt first.
I just got nervous reading this quote. I am not sure you are ready for a 4-plex. If you want to travel the world who will look after it?

The first few years in plex ownership are tight and it is best if you are on site and can DIY the management & maintance.

By experience the world do you want weekend trips to the mountains or weeks overseas?

Look into those REIT as well.

Justaerin

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Re: Pay off CC or buy first fourplex
« Reply #54 on: July 10, 2015, 11:56:09 AM »
Woah that's a pretty excellent calculator!  Whence did it come?
The template is all yours for the filling in.  See http://forum.mrmoneymustache.com/ask-a-mustachian/how-to-write-a-%27case-study%27-topic/msg274228/#msg274228.

Any questions/suggestions, just ask/suggest.

Awesome thank you!



It really highlights how unimportant "things" are, and how important freedom to go experience the world is. 


As most said get rid of the debt first.
I just got nervous reading this quote. I am not sure you are ready for a 4-plex. If you want to travel the world who will look after it?

The first few years in plex ownership are tight and it is best if you are on site and can DIY the management & maintance.

By experience the world do you want weekend trips to the mountains or weeks overseas?

Look into those REIT as well.


That's the biggest thing I'm anxious about, is having an anchor with my cash tied to it.  But the allure of having such great passive incoming-producing assets is appealing in the highest order. If I were either traveling or local, I'd have a PM company keeping an eye on it.  The RE community up here is pretty tight and I have some very good friends on the agent, owner, and lender side that are reliable advisors for PM companies as well as trustworthy trades. That's really the only reason I'd even consider having a property, because those resources combined with a VA loan make it seem foolish not to take advantage.  Ideally, I'd like no assets chaining me to any location so I could travel worry-free.

MoonShadow

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Re: Pay off CC or buy first fourplex
« Reply #55 on: July 10, 2015, 12:56:24 PM »

That's the biggest thing I'm anxious about, is having an anchor with my cash tied to it.  But the allure of having such great passive incoming-producing assets is appealing in the highest order. If I were either traveling or local, I'd have a PM company keeping an eye on it.  The RE community up here is pretty tight and I have some very good friends on the agent, owner, and lender side that are reliable advisors for PM companies as well as trustworthy trades. That's really the only reason I'd even consider having a property, because those resources combined with a VA loan make it seem foolish not to take advantage.  Ideally, I'd like no assets chaining me to any location so I could travel worry-free.

Rental property, as an investment, can only be expected to outperform the stock market when 'sweat equity' is involved.  There is nothing passive about it, and will become a part time job in it's own right.  If this doesn't sound like something you want to do, don't buy that fourplex; just put your money elsewere.

Midwest

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Re: Pay off CC or buy first fourplex
« Reply #56 on: July 10, 2015, 01:15:26 PM »
When I found MMM (April, 2013), I also had a very expensive, stupid car (a 2008 BMW 128i convertible).  I started trying to sell it in May and HOLY COW was it hard to sell.  I finally took it to CarLotz (consignment) in July and it sold before the month was out.  I allowed them to price it below market because I knew that I had to sell it in July or August because after Labor Day, it would never sell in my climate.

I had to cough up $1500 to CarLotz because, like you, I was underwater.  It was worth it. 

That said, let's approach this rationally rather than emotionally:

You owe $37k and have priced it at that, but what's the market value?  Is your price under that?

The dealer has offered you $34,500 so you'd lose $2500 if you took that price.

The payment is $550. 

.......

Assuming the market value is $37k and assuming your July payment isn't due until the 15th.... What if you re-priced it below market right now at $36k so you could sell it this week -- before you had to make the July payment?   You could even price it at $35,500 and do better than the offer from the dealer, couldn't you?

Basically, run the numbers and find the sweet spot of below-market price to move it quickly but maximum amount possible to reduce your loss.

Out of curiosity, what is the relevance of him making the payment or not in the decision to price?  Obviously the longer he holds it, the more interest he pays but each payment also reduces principal substantially.  Unless he has a cash flow issue, I don't see the relevance of the July payment to the decision.