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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: mooshie on January 09, 2014, 05:56:18 PM

Title: Reader Case Study - What to do with rental?
Post by: mooshie on January 09, 2014, 05:56:18 PM
5,723 (DH's salary, includes 401k contributions)
1,250 (rent from a rental property)
Total: 6,973

Current expenses:
401k contributions: 425 (currently set up at 6% to come out b-4 taxes, plus 3% employer match)
Charitable donations: 578
Mortgage on primary residence: 1,519 (includes taxes and insurance)
Mortgage on rental: 840 (included taxes and insurance)
Gas: 220 (includes DH's public transportation monthly pass)
Groceries: 250 (for 7 people)
Utilities: 300
Car insurance: 55
Miscellaneous spending: 304 (includes dates, entertainment and spending money)
Total: 4,349
Note: this leaves us with a difference of 2,500/month which we have just been putting into savings.
401k: 47,651
ROTH IRA: 14,000
Rental property equity: 70,000 (this is an estimate which of course depends on the market, but it's pretty close)
Primary residence equity: 60,000 (of course an estimate but I don't care what the value is until/unless I sell my house)
1995 Ford Taurus: $5 maybe
2001 Chrysler Town and Country: $1,000 (I suppose)

Total: 192,656

Rental mortgage: 130K @4.75%
Primary residence mortgage: 255K @4.15%

Specific Question(s): Providing a detailed breakdown is important, so is asking for specific information so we know what kind of help/advice you are looking for.
DH and I have a rental house that is our previous primary residence. We would've sold it b-4 moving but the market just wasn't what we wanted it to be so we decided to rent it out for a couple of years until we could get what we want out of it. Now that we should be able to sell for what we want we're thinking about selling mostly because it's 33 miles 1 way from our new home to the rental and driving out there to do showings and make repairs is a pain. Plus up until I discovered this blog and realized that early retirement is now a possibility for us our only plan for what to do with the funds from selling the house was to use it to pay down the mortgage on our house. But we do want to have a rental or 2 in retirement for some income, so this has me wondering. Should we keep the house (it has a pretty good earnings and I don't if something closer would earn as much)? Should we sell it and put the money into a mutual fund? Should we sell and use the $ to buy 2 new rentals? Or should we put the money towards paying down our mortgage? We are planning on having our mortgage paid off by the time we retire, but I keep thinking maybe it'd be better to put money into retirement than into the house for the time being. When I start working in a couple of years I should be able to earn enough to pay off the house b-4 we retire.

Did I miss any details? What do you all think?   
Title: Re: Reader Case Study - What to do with rental?
Post by: Cyrano on January 09, 2014, 07:25:06 PM
As long as you have a good tenant and no major repairs, the rental is doing OK. But a bad tenant, prolonged vacancy, or large expense will wipe out its cash flow. If you are on good terms with your tenant, renting it until they move out and then selling could work. If you are on indifferent terms with your tenant, I'd sell sooner.
Title: Re: Reader Case Study - What to do with rental?
Post by: mooshie on January 09, 2014, 08:07:03 PM
We've had great tenants, but they will be moving out in May when their lease is up, so we just need a plan for what to do with the house and what to do with the money if we sell.