Preparing for hiatus - what to do with 80k

[JayKay]

Hi everyone

Here's the situation: My wife and I are in our 40s, no kids, and have been investing in real estate for many years now.  But, last year, we decided to change things up for an easier and more fun lifestyle.  We moved to a lower COL area and the intent was for me to take some time off or maybe become semi-retired while she started a new business.

But I found myself employed again as a programmer pretty soon after.  It more or less landed in my lap, the money was pretty good for the area, so I took it.  But, it's scary how fast almost a full year has blown by so quickly and still no time off for me.  So, I've already given my job notice and I'll be going until the end of December of this year.

During this period of employment, we've done some reasonable financial preparation like saving up what we can, tracking monthly expenses carefully, addressing any high-interest debt, reducing recurring expenses, etc.  And, for the past 4-5 months, we've been living entirely off of our investment account to get comfortable with it and help establish new financial habits.

Anyway, we have about 80k in cash right now and trying to decide on what a good next move is.  If I wasn't planning on taking time off, the strategy would be clear, but preparing for a longer hiatus (1+ year) makes me think I should evaluate new strategies.

Assets: Most of our income comes from RE notes and we also have some rental properties, 5 doors, all leveraged, low-interest 30yr fixed
Loans: In addition to the rentals, we've got a mortgage on our primary home and a couple of 0% car loans.

I already have a few options detailed which I'll post next.  But I'm hoping to get some creative/interesting uses for the money that I may not have thought of.

I have posted this question to a few other places online, but haven't really received much comment, so I'm hoping there will be more activity here.

[ysette9]

Without knowing more, it is hard to say exactly. How much is $80K compared to your yearly expenses? What kind of buffer fund do you have in place for your rentals for the inevitable repairs/maintenance/vacancies?

I believe that GoCurryCracker pulls the living expenses they will need for the year from their investments at the beginning of the year, parks it in a high-interest online savings account, and then lives off of that cash while the rest of their stash does whatever it will do in the interim. You may consider doing something similar.

[JayKay]

Here's some options I've come up with:

Simple - Put cash into just generating more income or maybe diversifying into something like hard money. Work just to pad the cash reserves, then leave.

Small Hedge - One of our properties is really close to being F&C (<10k) so we pay that off. (We also might pay off our cars in this plan, ~15k total, though that seems wasteful)  After that, we're left with about 50-65k which we invest for more cashflow.  Maybe take a HELOC out on the F&C place as a further hedge but leave balance at zero for emergency credit.

Lever Up - Keep working regular job, use W2 to qualify for a few more properties (maybe BRRR?), get them rented, and build up another cash cushion before leaving.  This could also include equity-stripping the nearly F&C rental through a cash-out refi.  Pros: Higher long-term growth  Cons: Higher time commitment, riskier

Get Liquid - Stay working, dump all money and future cashflow into an index fund or some type of other security. By the end of the year, this would likely be a six-figure nest egg as long as the market holds.  Pros: Liquid, reasonable returns   Cons: Low cashflow, unfamiliar territory

Debt Free - Don't take time off, keep working, put everything into paying off rental properties.  Pros: Safe  Cons: Low growth, super high time commitment

Think Different - Keep working regular job, use the cash to start a small RE firm or other business on the side to generate income.  Pros: Highest return, has business potential, will keep me busy.  Cons: Risky, exhausting, takes time

One More Door - Save up enough to do an all-cash deal on a rental and buy without a mortgage.  Pros: More stable cashflow, lower debt  Cons: Lower returns, lower debt

[ysette9]

How close are you to FIRE? Would another rental or another year's worth of savings push you over the top?

[JayKay]

Without knowing more, it is hard to say exactly. How much is $80K compared to your yearly expenses? What kind of buffer fund do you have in place for your rentals for the inevitable repairs/maintenance/vacancies?

I believe that GoCurryCracker pulls the living expenses they will need for the year from their investments at the beginning of the year, parks it in a high-interest online savings account, and then lives off of that cash while the rest of their stash does whatever it will do in the interim. You may consider doing something similar.

So, by Moustachian standards, our expenses are not low, but 80k is almost double what our yearlies are.  As for buffer funds, the 80k is everything we have liquid, but as the year goes on it'll be more since I'm essentially banking my entire income.  But if the past several years of history is any judge, our rentals have been doing pretty good from a maintenance perspective.  Even after some big repairs, we have actually never had a losing month across all doors.  And, there's no potential vacancies coming up anytime soon.  But, never say never, so that's why I'm thinking of setting up a HELOC has a hedge.

How close are you to FIRE? Would another rental or another year's worth of savings push you over the top?

Well, technically, our passive income exceeds our expenses by a reasonable margin right now, so we're FI to a certain extent.  But there are shades of FI, there will always be investment risk and it's never really going to be enough.  So, another year wouldn't really change that much for us.

And, maybe it's bad of me to say, but I'm so tired of chasing FIRE and just want to move on.  So I'm hoping that this hiatus will allow me to find a new direction.