Hi There,
I am in search of some advice as to whether I should pay off a condo I am currently buying (close on friday) with an inheritance I'm about to receive or if I should keep my mortgage and use that new cash to buy a rental property. If I pay off the mortgage now, I will not qualify for another year or two as I am self-employed, work part-time, and take a lot of deductions. I have been managing vacation rentals in my area for over two years so I have a fair amount of experience.
I have not received the inheritance yet and it is in the early stages, so I am not certain of the total. I suspect it is around $160k.
Here is my current mortgage:
30yr. interest only at 5%, with 5 year ARM
Prepay: no penalty $5,000 min, in $1,000 increments after
**I accepted an interest only loan at a high rate because it is from a Private Lender friend and I did not expect to keep it more than a year.
Down Payment: $17k
Loan: $144k
Updates needed: nothing, but will prob spend up to $500
Furnishings: I already have everything
Original Plan: completely pay off the debt and continue my simple, mustachian part-time working life (10-15hrs/wk. rental and massage businesses) as usual with more security and very low home expense (only HOA/taxes/insurance).
- OR -
If I purchase a fixer upper, 1bd/1ba:
cost: $125k
upgrades plus labor: $25k
craigslist furnishings: $1500 - 2,000
vacation rental income potential: $1500-3500/month (depends on season)
regular furnished apt. rent potential: $1150+ depending on location (just in case vacation market changes)
monthly expenses: $500 (HOA, insurance, tax, utilities, cleaning supplies, toilet paper)
monthly repairs fund: $50
I would love to be able to pay off the mortgage in 5 years before it adjusts, but after running some numbers it looks like it could be 7, with my current income.
Other income/expenses:
Massage income - $1000/mo, before taxes (can grow, I have had it at $3k/mo before)
Rental management income: $1500-3000 before taxes
Mortgage (interest only) - $600
Taxes/insurance: $100
HOA: $240
Utilities (wifi plus electric): $100-125
Student loans: $110/mo. $1,010 at 2.3% and $1,721 3.15%
General Expense: $1000/mo.
Roth IRA savings: $450/mo., $9k total. I am 28years old. I could pour this into the mortgage debt instead if necessary.
Car: bought in cash
*Secured $10k LOC for emergencies, 2.6%*