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Started By
Message
Pay off house or invest Pt. 2
Posted on 12/22/21 at 10:20 am
Posted on 12/22/21 at 10:20 am
I saw the other thread so I'm fairly certain I know what I'm going to get here but wanted to run my unique situation by the MT hive mind.
My wife passed away recently and left me with $400k in life insurance and a paid for home that we do not live in. It was a family members and we were planning to rent it with it as a safety net. Here's some data about my current situation -
Age - 35
Primary home mortgage - 196k @ 4% 5 years in/worth ~$260k
Other debt - ~$10k at various rates
Retirement - 401k/RothIRA - Little to nothing in there because of her illness
I make $130k per year and have 1 child under 5.
The secondary house needs work to be rentable and is worth about 120,000. Insurance is 3k per year and property tax $450. I'd say it needs 10k to bring it up to snuff for renters.
I know I should max out my IRA and 401k. I am unsure what to do with the extra house as I believe it'll bring in about 1000 per month at the most. The neighborhood its in was great in the 50s but now is meh. I also want to make sure my child has something for the future. Part of me wants to sell the secondary home and use the money to invest as the trouble of dealing with renters does not seem appealing short term, however, long term might be a great stepping stone for retirement/buying more properties.
If you need any other info let me know.
P.S. I do plan to take my little one on the most spectacular trip to Disney this summer with some of the money. I also plan to sell both our cars and put that into something new because of the memories.
My wife passed away recently and left me with $400k in life insurance and a paid for home that we do not live in. It was a family members and we were planning to rent it with it as a safety net. Here's some data about my current situation -
Age - 35
Primary home mortgage - 196k @ 4% 5 years in/worth ~$260k
Other debt - ~$10k at various rates
Retirement - 401k/RothIRA - Little to nothing in there because of her illness
I make $130k per year and have 1 child under 5.
The secondary house needs work to be rentable and is worth about 120,000. Insurance is 3k per year and property tax $450. I'd say it needs 10k to bring it up to snuff for renters.
I know I should max out my IRA and 401k. I am unsure what to do with the extra house as I believe it'll bring in about 1000 per month at the most. The neighborhood its in was great in the 50s but now is meh. I also want to make sure my child has something for the future. Part of me wants to sell the secondary home and use the money to invest as the trouble of dealing with renters does not seem appealing short term, however, long term might be a great stepping stone for retirement/buying more properties.
If you need any other info let me know.
P.S. I do plan to take my little one on the most spectacular trip to Disney this summer with some of the money. I also plan to sell both our cars and put that into something new because of the memories.
24
Posted on 12/22/21 at 10:22 am to JimEagle
quote:
My wife passed away recently
quote:
Age - 35
Damn dude, sorry to hear that. Terrible.
Posted on 12/22/21 at 10:24 am to JimEagle
I'm all for paying the home off for peace of mind but you are really too young for that advice and have a good salary.
Buy a rental or 2
Buy a Bitcoin
Stick the rest in the market
Buy a rental or 2
Buy a Bitcoin
Stick the rest in the market
Posted on 12/22/21 at 10:24 am to JimEagle
Sorry for your loss man. I'll run some numbers for you later.
Posted on 12/22/21 at 10:30 am to JimEagle
Sorry to hear about your wife. I can’t imagine with a child so young how difficult this is on many fronts. It does look like you have options here financially. I’d consider refinancing your primary home down to avoid PMI and invest the rest in retirement and your child’s education. Definitely pay off that low debt. You can be the only one to decide if you want the hassle of rental property. It can be a good investment to add to a portfolio but it can also be a bad one if you do not know what you’re doing or manage it incorrectly. That’s my amateur two cents. Hope you have a great time at Disney. 
Posted on 12/22/21 at 10:36 am to JimEagle
quote:
My wife passed away recently
quote:I am so sorry. What a difficult situation. I strongly urge you to get grief counseling for some period of time (6 months to 1 year maybe) before making any big financial decisions. Your world is turned upside down. Again, I’m extremely sad for you and wish you the best.
Age - 35
ETA: a question to consider about the secondary property: if you had its value in cash right now, would you buy it as an investment property?
If your primary mortgage has PMI, pay it down enough to get rid of the PMI for sure.
You have plenty of time to save for retirement, but need to start now. Max your 401k and Roth (can still do 2021).
I would probably sell the secondary property if I was in your position.
This post was edited on 12/22/21 at 10:47 am
Posted on 12/22/21 at 10:42 am to JimEagle
Really sorry about your loss.
How far away is the house you would rent out? Any idea what it would rent for?
I like the plans for Disney.
How far away is the house you would rent out? Any idea what it would rent for?
I like the plans for Disney.
This post was edited on 12/22/21 at 10:44 am
Posted on 12/22/21 at 10:47 am to JimEagle
What I would do with $400k:
Refinance House to $100k at lower rate
Pay off other debts
Start a Roth for you and your child and contribute the max this year and again in January for 2022
Sell the rental property. It is paid for but needs more work that you probably don't want to be doing right now. Sellers market, take the cash and invest around $200k in a couple of ETF's/mutual funds in a brokerage account (TD Ameritrade). This can be easily sold and in your checking account in a few days if needed- not tied up like a retirement account.
Keep the rest of the cash in a savings account as an emergency fund.
You can always jump back in the rental game at another date. I'm 40 and bought my first property last year.
Refinance House to $100k at lower rate
Pay off other debts
Start a Roth for you and your child and contribute the max this year and again in January for 2022
Sell the rental property. It is paid for but needs more work that you probably don't want to be doing right now. Sellers market, take the cash and invest around $200k in a couple of ETF's/mutual funds in a brokerage account (TD Ameritrade). This can be easily sold and in your checking account in a few days if needed- not tied up like a retirement account.
Keep the rest of the cash in a savings account as an emergency fund.
You can always jump back in the rental game at another date. I'm 40 and bought my first property last year.
Posted on 12/22/21 at 10:49 am to ItzMe1972
quote:
How far away is the house you would rent out? Any idea what it would rent for?
From my current location about 15 mins. Here's the kicker - Where I'm at now was a move I did for her. My family/support system is an hour and half away so I planned to move my primary back home if the housing market allows it. I know my current home value is inflated but don't want to over pay for a new house to relocate. I have her family here to help if needed but there's no other reason to live here.
Posted on 12/22/21 at 10:49 am to JimEagle
Fwiw: rental provides a nice monthly income stream when retired…something that is fairly predictable ..
I have one in my retirement income stream…I use it like a bond… two nice features:
It is inflation adjusted (imo)…. As time goes on and inflation goes your value of property increases thus your rent goes up…
Write offs:: you write a lot of operating expenses and depreciation of the property against you revenue… so you get rent but the govt does not see a lot of it show up on your taxes…
I have property manager that finds and checks renters etc…also have trusted plumber..ac..handy man .. and let them all take the task on… early if life when busy with work and life …. take less money and let’s others manage stuff… later in life when kids gone ..retired etc and you have more time on your hand maybe you will want to do that as your “retirement job”
I have one in my retirement income stream…I use it like a bond… two nice features:
It is inflation adjusted (imo)…. As time goes on and inflation goes your value of property increases thus your rent goes up…
Write offs:: you write a lot of operating expenses and depreciation of the property against you revenue… so you get rent but the govt does not see a lot of it show up on your taxes…
I have property manager that finds and checks renters etc…also have trusted plumber..ac..handy man .. and let them all take the task on… early if life when busy with work and life …. take less money and let’s others manage stuff… later in life when kids gone ..retired etc and you have more time on your hand maybe you will want to do that as your “retirement job”
Posted on 12/22/21 at 10:52 am to JimEagle
quote:Then definitely sell the rental. It will give you more flexibility to make a better decision for you and your child.
From my current location about 15 mins. Here's the kicker - Where I'm at now was a move I did for her. My family/support system is an hour and half away so I planned to move my primary back home if the housing market allows it. I know my current home value is inflated but don't want to over pay for a new house to relocate. I have her family here to help if needed but there's no other reason to live here.
And again, I wouldn’t rush into a big decision about moving, selling your primary residence, changing jobs, etc. until you get some grief counseling and get some time with your unexpected life change.
This post was edited on 12/22/21 at 10:56 am
Posted on 12/22/21 at 11:02 am to WDE24
quote:
And again, I wouldn’t rush into a big decision about moving, selling your primary residence, changing jobs, etc. until you get some grief counseling and get some time with your unexpected life change.
Yep. I'm already doing this and have been told that by multiple people. Just rounding up possible moves I can make to think over until its time. Thanks for your input.
Posted on 12/22/21 at 11:03 am to JimEagle
Part of me wants to sell the secondary home and use the money to invest as the trouble of dealing with renters does not seem appealing short term, however, long term might be a great stepping stone for retirement/buying more properties.
---
May NOT be wise to make any immediate financial decisions. Take a while to breathe. You're not sure where you want to live and not sure of plans for your primary home.
Pay that $10K off and relax for a while. Ponder your options and make some choices after a year.
You could fix up the "rental" now to a point that you could rent or sell down the road.
---
May NOT be wise to make any immediate financial decisions. Take a while to breathe. You're not sure where you want to live and not sure of plans for your primary home.
Pay that $10K off and relax for a while. Ponder your options and make some choices after a year.
You could fix up the "rental" now to a point that you could rent or sell down the road.
This post was edited on 12/22/21 at 11:19 am
Posted on 12/22/21 at 11:06 am to JimEagle
Sorry for your loss.
Giving everything you put out there, I would sell the secondary home, pay off other debt, max ROTH, and pay off the primary. Now that you don't have a house note, I would also start maxing my 401k, IRAs, and 529 (or UTMA).
Paying off the house goes against the grain of what is "normal", but I see the fact that you may need to make other adjustments in your life as you are now a single family household. That could result in a lower salary. If you do not have that cash flow demand, it may be much easier to take that cut to have more time to spend with your child. Especially if you end up moving closer to your family.
Giving everything you put out there, I would sell the secondary home, pay off other debt, max ROTH, and pay off the primary. Now that you don't have a house note, I would also start maxing my 401k, IRAs, and 529 (or UTMA).
Paying off the house goes against the grain of what is "normal", but I see the fact that you may need to make other adjustments in your life as you are now a single family household. That could result in a lower salary. If you do not have that cash flow demand, it may be much easier to take that cut to have more time to spend with your child. Especially if you end up moving closer to your family.
This post was edited on 12/22/21 at 11:09 am
Posted on 12/22/21 at 11:14 am to JimEagle
Sorry for your loss. Here is my advice: you have a young child who is now without a mother and dealing with that alone is a handful. Rental property will be a headache to add to it. You’re young with a lot of good years left and an age where you can go out and meet people and find dates once you’re ready. You make good money for a 35 year old.
Reduce your stress and secure a future for your child.
Sell the rental home for 120k and put it in some type of interest bearing acct or trust for your child to get when he/she graduates. This covers college expenses or whatever else to get your kid started in his/her new adult life.
Take the 400k and pay off your house. Pay off your other debt. That’s about half. Put 50k or so to replenish your 401k and take the rest and reward yourself with something. Do something you’ve always wanted to do or buy something you’ve always wanted. You are now debt free and your child’s future is secure. Start contributing the max to your 401k out of your salary now that you’re debt free and enjoy your life.
This is what I would do
Reduce your stress and secure a future for your child.
Sell the rental home for 120k and put it in some type of interest bearing acct or trust for your child to get when he/she graduates. This covers college expenses or whatever else to get your kid started in his/her new adult life.
Take the 400k and pay off your house. Pay off your other debt. That’s about half. Put 50k or so to replenish your 401k and take the rest and reward yourself with something. Do something you’ve always wanted to do or buy something you’ve always wanted. You are now debt free and your child’s future is secure. Start contributing the max to your 401k out of your salary now that you’re debt free and enjoy your life.
This is what I would do
Posted on 12/22/21 at 11:26 am to I Love Bama
quote:
Buy a rental or 2 Buy a Bitcoin Stick the rest in the market
I think that’s too much stress. In my opinion he should do everything to eliminate his debt and secure his child’s future first. He will be dealing with grief and his child’s grief and raising a child alone. Rental property is a headache and more stress. I think it would help him enjoy life and deal with things if he weren’t distracted by such things.
If he didn’t have a good salary and made 50k I’d agree to invest, but he makes enough to enjoy himself and invest portions of that over time. Use the extra cash to get debt free and secure his child’s future
Market isn’t great right now anyways
Posted on 12/22/21 at 11:27 am to JimEagle
(no message)
This post was edited on 10/27/22 at 12:53 pm
Posted on 12/22/21 at 11:31 am to JimEagle
Sell the rental. Don’t make any other decisions for a while. Keep all the other money for the most part. Revisit what you think you need to do a year from now.
So sorry for your loss, dont let emotions cause you to make a mistake right now. God bless you and your child.
So sorry for your loss, dont let emotions cause you to make a mistake right now. God bless you and your child.
Posted on 12/22/21 at 11:33 am to Dawgfanman
Not really financial advice but more on a personal level, he should take about 10k and take his child on a nice fun vacation. If anything just to take both their minds off what happened and clear his head. Help the child deal with the loss
Posted on 12/22/21 at 11:52 am to JimEagle
Sell the rental, stick 300k-400k in an EFT that follows the S&P. Refinance your house to a lower monthly note and invest in 401k, roth, child education, and emergency savings with a percentage of your paychecks until emergency fund is where your target is and your child has finished their education.
This post was edited on 12/22/21 at 11:54 am
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