Author Topic: What to do with an extra $100k  (Read 4866 times)

Fugirlrealestate05

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What to do with an extra $100k
« on: June 10, 2014, 01:13:29 PM »
So, we are moving to a less expensive city and have an extra $100k to invest. Should we,
- pay off the mortgage of one our rental properties (would net an extra $750 per month) and then max out TSP,
- divide it equally among 3 529 plans (oldest child will be turning 5), or
- invest the $100k in the regular market.

HHI is $110k with SAHM. Both of us are in our mid-thirties. Have over $550k in retirement accounts, $50k in 529 plans, $60k in bonds, $100k in brokerage, $130k in bank accounts, 2 rental properties (both cash flow positive), and new primary residence (which won't be our forever home so we have no desire to pay it off). We max out 2 Roth IRAs each year and contribute 10% to TSP and $9k to 529 plans. Our plan was to use one of our rental properties to pay for college (one is valued at $250k/owe $100k, the other is $290k/owe $180k). Both were purchased before we had kids.

Chuck

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Re: What to do with an extra $100k
« Reply #1 on: June 10, 2014, 01:39:08 PM »
I vote investing in the regular market. The rental property sounds like a higher guaranteed return, but I like unrealized capital gains and not having to worry about vacancy. But that's me.

The 529 can be taken care of at any time, with revenue from any source (right?) so I don't think you need to put your windfall there. It wouldn't be a terrible idea though.

Frankly it sounds like you have an embarrassment of riches when it comes to options. Ok, Ok! Pick a number between one and three...

rmendpara

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Re: What to do with an extra $100k
« Reply #2 on: June 10, 2014, 02:50:30 PM »
So, we are moving to a less expensive city and have an extra $100k to invest. Should we,
- pay off the mortgage of one our rental properties (would net an extra $750 per month) and then max out TSP,
- divide it equally among 3 529 plans (oldest child will be turning 5), or
- invest the $100k in the regular market.

HHI is $110k with SAHM. Both of us are in our mid-thirties. Have over $550k in retirement accounts, $50k in 529 plans, $60k in bonds, $100k in brokerage, $130k in bank accounts, 2 rental properties (both cash flow positive), and new primary residence (which won't be our forever home so we have no desire to pay it off). We max out 2 Roth IRAs each year and contribute 10% to TSP and $9k to 529 plans. Our plan was to use one of our rental properties to pay for college (one is valued at $250k/owe $100k, the other is $290k/owe $180k). Both were purchased before we had kids.

Lol @ Chuck, but it's sort of true. You really are just optimizing at this point. Any option will be positive, it just depends on what you value the most.

If it were me, I'd say pay off one property in full, and then begin using the $750/mo cash flow to diversify into the broader market. At $9k/yr, you're already putting in plenty to the 529 plans, and may even reach a point where you will risk over-funding these accounts (unless all your kids want to be doctors and you plan to pay for all of it). Your choice. I'd keep the debt on the other property as you can easily handle a bit of debt. *This assumes the property is reasonably well maintained and you believe it will stay occupied*

Is there any of the options that you offered that would help you sleep best at night? If so, I'd go with that one. If not, I think paying off 1 property and keeping a mortgage on another is ideal, as it frees up some cash to diversify.

hexdexorex

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Re: What to do with an extra $100k
« Reply #3 on: June 11, 2014, 08:18:02 AM »
Depends on mortgage rate. Personally If it is under 5% I would invest it in the market. I agree with the comments about untaxed capital gains. Over 30 years this makes a huge difference in the realised gains between rentals and the market...

Fugirlrealestate05

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Re: What to do with an extra $100k
« Reply #4 on: June 11, 2014, 11:40:16 AM »
Interest rate is 5 1/8%. Just to make sure I understand correctly, is "unrealized capital gains" referring to the real estate appreciation or possible stock appreciation?

MgoSam

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Re: What to do with an extra $100k
« Reply #5 on: June 11, 2014, 12:51:27 PM »
I have never had a mortgage or owned property so I would take my advice with a grain of salt but my initial thought is to either pay off your mortgage or pay off a significant chunk of it. The reason being is that I absolutely hate debt. I am looking to buy a house in a year or two and while I will take out a 30 year mortgage but make extra payments to pay it off in 15 years (reason for the 30 year is for the option to pay less should I need to).

Chuck

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Re: What to do with an extra $100k
« Reply #6 on: June 11, 2014, 01:25:19 PM »
Interest rate is 5 1/8%. Just to make sure I understand correctly, is "unrealized capital gains" referring to the real estate appreciation or possible stock appreciation?
Stock appreciation.

EDIT: With your interest rate that high, I'm now narrowly in favor of paying off the mortgage.
« Last Edit: June 11, 2014, 01:28:48 PM by Chuck »

hexdexorex

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Re: What to do with an extra $100k
« Reply #7 on: July 23, 2014, 06:42:11 PM »
If you are split can just split the difference. The stock market should win out over the next 30 years but neither real estate or the market are @ fire sale prices right now... :(