New in town and need a direction

[jmr5x]

Topic Title: Am I going in the right direction?

Life Situation: Married Filling Jointly, no dependants, 32 and 28 years old

Gross Salary/Wages: 140,000

Pre-tax deductions:  6,500 in my retirement plan, company pays 6% and I do 10% managed by NationWide (I would like to up this to the max for next year )

5,000 in wifes 401k, dont have any details on this account yet.

Rental Income, Actual Expenses, and Depreciation: 18,000 of this is positive cash flow after mortgage insurance fees are paid from rentals that we just started this year. This does not include paying ourselves to manage, I will be doing all moderate repairs myself unless I can make more money at work than it costs to do them. Planned on doing 1 a year but somehow went overboard!

Adjusted Gross Income: This is the first year for rentals so we are not sure on expenses yet.

Taxes: ??

Current expenses: Tracking as we speak,  New to this game and never tracked expenses before.
75,000 mortgage on a 15 year note with 14 years remaining 3% interest for our personal home

110,000 in mortgages, 15 year notes for 5 units of rental property. have 20% equity before we did renovations

40,000 in debt between credit cards and student loans
Vehicles paid for


Assets: 250,000 in real estate, 30,000 in vehicles and equipment

Specific Question(s):  Leave current job as soon as possible and maintain a positive cash flow from rental income to equal what is currently made.  This will be a long road I am sure. Planning on doing side work as remodeling on the side to supplement income.

Wife will retire in 25 years from her job, she likes it and it is great insurance.

Thought about possibly refinancing all properties into 1 mortgage and get some of the equity out to pay off the high interest credit cards and student loans. 

Is the right track to keep maxing out retirement at work for the next 5-10 years while also buying as many rental properties as we can until we can bring in 8,500-10,000 a month positive cash flow from them?  These homes would be bought with 20% down and usually cost 40,000 dollars with 2,000-5,000 worth of repairs needing to be done. Work is financing the out of pocket down payments and remodeling costs.

[Dee18]

I would not quit that day job until I had all credit card and student loan debt paid and a six month emergency fund.

[jmr5x]

I would not quit that day job until I had all credit card and student loan debt paid and a six month emergency fund.

I do not plan on leaving the day job until we positive cash flow 10,000 per month from real estate.  I would pray that the credit cards and student loans would be payed off by that time haha At our current rate all of the high interest personal loans will be paid within 1 year unless we refinance real estate and get some equity out to pay off.  Thats what I would like some feed back on from you fine Mustachians.

[StetsTerhune]

We need A LOT more information to give you any advice. Specifics specifics specifics. I suspect this is your main issue as well, and putting more information together will help you enormously.  You don't know what your taxes are, or your expenses, or have any expense projections on your current rentals. Figure this out first. Even without specific expense tracking you should be able to look at past bank statements and get a decent general idea.

Once you get your financial picture nailed down, you need to figure our what your actual goals are. "Replace current income with net rental income" is very arbitrary. Why do you want this? What are you actually looking for in life?

After you get those two clarified in your own mind, come back here with more specifics and you'll get TONS of advice. There's really not much that can be said to your question as stated though.

[MDM]

Life Situation: Married Filling Jointly, no dependants, 32 and 28 years old
Gross Salary/Wages: 140,000

Pre-tax deductions:  6,500 in my retirement plan, company pays 6% and I do 10% managed by NationWide (I would like to up this to the max for next year )

The usual suggestions for the above circumstances:
 - $18K each into 401k plans
 - $5.5K each into IRAs, traditional deductible if possible, Roth otherwise.
 - $6,650 into HSAs.
Reason(s) you aren't doing that?  Note: there could be perfectly good reasons, just asking to understand.

[jmr5x]

I dont know much about the HSA yet and I was under the impression the IRA is a low growth option?  I am very new to investing and doing as much research as possible. 

[Sibley]

It sounds like you're on the right track for now. You said you're tracking your expenses now. Once you have some idea of what you're actually spending, look at it. What doesn't need to be there? What can be optimized? Feel free to post it here if you want help.

Some basics many need to look at: cell phones, cable tv, insurance, food (including restaurants), vehicles. Everything gets examined, no matter the emotions attached.

Others are helping you with the investments side, but education is your friend.

Pay off your credit cards and student loans. Possibly consider consolidating the SLs to reduce interest rates. Try to reduce interest rates on the credit cards as well. Makes it easier to slay them!

Also, you have rentals. Make your life easier come tax time. Keep the finances for your rentals separate from your personal finances. It may make sense to have a dedicated bank account given the number of rentals you have. You'll need to figure out an income statement for taxes anyway, so make it easy on yourself.

[MDM]

I dont know much about the HSA yet and I was under the impression the IRA is a low growth option?  I am very new to investing and doing as much research as possible.

"IRA" merely dictates the tax treatment of whatever investment you have chosen to fit in the IRA.  You may choose a low growth option but you certainly don't have to.  E.g., see https://www.bogleheads.org/wiki/Traditional_IRA.

[jmr5x]

Thanks for the info!  looks like I have a lot to learn and actually need to figure out what my work has me investing in! 

We do have a dedicated account that all rental income and expenses are associated with. Except the out of pocket remodeling expenses that are paid from the day job.  Just now started tracking those.  I know taxes are going to be a bear this first year but next year I will have them whipped I hope.

[palebluedot]

For investing, Jim Collin's stock series is a great place to start: http://jlcollinsnh.com/stock-series/
For tax optimization, Mad FIentist is your go to person: http://www.madfientist.com/archives/

Best of luck!

[jmr5x]

Awesome resources,  I am fixing to start digging in!

Thanks!

[Frugalman19]

I dont know much about the HSA yet and I was under the impression the IRA is a low growth option?  I am very new to investing and doing as much research as possible.

IRA just dictates how something is taxed. You could even have one of your rentals in an IRA. I would be maxing out retirement savings. You are in a great position to hunker down now and pay all the debt off and then think about additional rentals. My opinion. But, we do need more info.

On the investing side, speak with nationwide and ask questions about what funds they offer in the 401k that focus on growth. The last 10 years, the stock market has outpaced real estate by a large margin.

[jmr5x]

Sounds like I will be holding off on another rental and hammering away this debt.  Hope to do this in 1 year.  I just took a new position at my current employee but will be working for a different company ,strange I know,  and will be rolling over their 401k to a vanguard 401k.

[Urchina]

If I were you,  based on what you've said:
1. Contribute to your and wife's deferred comp plans up to the employer match.
2. Get 1 month of expenses in an emergency fund. You will eventually build this up to 3-6 months of expenses but for now you just need enough to avoid going back into debt for something like a water heater or car repairs. 
3. KILL YOUR (non-mortgage) DEBT. MMM has some great posts on this, but your debt is an emergency! It permanently reduces your ability to do other awesome things like retire early. 
4. Max out employer-sponsored deferred comp plans and IRAS. There's plenty of good investing advice here.  We use low-cost index funds and I'd highly recommend The Bogleheads forum online for more details on this very low-cost approach.
5. Build up to a 3 or 6 month emergency fund.
6. Dump all extra cash into taxable accounts.


It goes without saying that you'll do everything you can to eliminate expenses while you're doing this.

Good luck and enjoy the ride!