Author Topic: Starting From (Less Than) Zero - Save For Another Down Payment?  (Read 532 times)

kroozin

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Ever since I discovered MMM recently I've been non-stop crunching numbers figuring out I can optimize my route to FI given my current situation. Based on my math (I'll provide a quick-hit summary below), I think it makes sense to save/invest my surplus rather than pay down my debt, and after some research, I'm considering real estate as a starting point. Here's a quick breakdown:

Current Net Worth (House, Student Loans, small IRA funds): -$22,000
Current Mortgage: $1,370/mo
  • $1,032 of this is principal/interest
  • $147.50 of this is PMI, about $37,400 away from removing if I ignore appreciation
  • Rest is taxes/Insurance
Mortgage interest rate: 4.125%
Student Loan interest rate: 4.37%

The PMI has an "effective" interest rate of about 4.5% currently, so all three instances of debt seem low enough that investing makes more sense.

Wow that was a lot of setup haha...here's the actual question.

In my area (Nashville), multi-family homes (duplex, triplex, quadplex) START at about $250,000 on the low end, and those will likely need some work. This means that I would first need to save about $50,000 for a 20% down payment before I can invest. At my current savings rate, it would take me just under 2 years to get there (not to mention I would be paying minimums on debt during that time since I'm saving my surplus), which makes me wonder if those two years of investments would be better placed elsewhere.

Any thoughts are appreciated!

waltworks

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Re: Starting From (Less Than) Zero - Save For Another Down Payment?
« Reply #1 on: March 09, 2019, 09:54:29 AM »
RE investing requires some amount of capital for DP, but it also requires a big emergency fund for SHTF situations which *will* come up with a rental.

Invest in normal boring index funds and paying down debt if you want to. Revisit this question in 2-5 years when you are better situated.

-W

kroozin

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Re: Starting From (Less Than) Zero - Save For Another Down Payment?
« Reply #2 on: March 09, 2019, 11:01:06 AM »
That's actually pretty much what I expected to hear. Based on my situation that's what made sense to me, but I guess I just needed a sounding board to get confirmation. Thanks!