This is my first post and I'm looking for advice on some of the areas that you think I could improve my personal finance portfolio. I've been actively seeking ways to make extra cash on the side with my spare time but haven't found my niche yet. I am a beginner property investor with a duplex for passive income. I use credit cards for the majority of my purchases to leverage spending. Also, I save around $3K every month.
Currently, I am paying monthly extra principle of $420 towards my primary residence in hopes of owning it in 16 years and not paying any extra principle on my investment property. I plan to save for a down payment for another investment property early next year.
My long-term goal is to reach financial freedom in my early 40s through a mix of pension, liquid cash, investment properties and retirement accounts.
Here's some details about myself:
Age: 26, married
Job Monthly Earnings (after taxes): $5500/month
Investment Property Monthly Earnings (after PITI): $1000/month
Emergency Fund: $20K (Planning to move funds to Chase Savings account for the $200 bonus after 90 days, then to a high interest savings account)
Vanguard Roth IRA: $25.6K (Target Retirement 2050) Max out every year $5500
Roth TSP: $6.3K (Target Retirement 2050) Pay $200 each month
Monthly Expenses: $3.3K total
Auto: $25k (pay $5k each year)
Mortgages: Primary owe $203K (30 yr fixed/3.75% VA), Investment owe $54K (30 yr fixed/5.25% Conventional)
Credit Cards: Luxury Card Gold MasterCard, Barclay Arrival Plus MasterCard, American Express Platinum, Chase Freedom ($0 debt on all cards)
1) Planning to move in a year and rent out my primary residence. Should I refinance my primary VA loan to a conventional (hopefully 15 year fixed @2.75%) and free up my VA so I can use it on my next multi-family purchase or just use the VA loan for a second time and pay the 3.3% funding fee?
2) Is there a better fund I should allocate my Vanguard Roth IRA to? Maybe 100% to the Vanguard 500 index fund?
3) Any other suggestions on what I could possibly be doing better with my setup or possibly ways to earn some extra cash on the side? Open to all suggestions.
Thank you for your time.
Fri Mar 25, 2016 2:10 am
oldguy Senior Member
Cash: $ 715.00
Joined: 21 May 2006
quote: I am paying monthly extra principle of $420 towards my primary residence in hopes of owning it in 16 years and not paying any extra principle on my investment property.
Looks like you've got a great start!!
Think of your income stream as fixed and your task is to apply it to "its highest and best use".
I would NOT prepay 3.75%FR, longterm capital. A USA mortgage is almost the cheapest capital in the world, you can go to a bank, ask for $300k, ask for a 3.75% rate, ask for that rate to be guaranteed for 30 years, and get the money. Only in the USA, all other nations require periodic resets (like a VAR, the rate changes). So directing your income to prepaying 3.75% is NOT a good way to spend your income, instead, retain the use of that $203k, pay the minimums, and invest at 11%/yr.
Same with doing a 15 yr refi, you'd be spending extra monthly cash on principal when it could be going toward your 11%/yr investments. The goal isn't to minimize your interest payments, the goal is to maximize your income.
Your $273,000 in T50 plus the new $7900/yr (@11%/yr) will be $1,100,000 at age 49. And >3M at age 60 even tho you won't be adding to it after retirement. But the point is - you'll get a lot more use out of your money by directing it to 11%/yr funds than by prepaying low cost loans. (And remember, any property appreciation is yours, whether or not you carry mortgages.)
We had 4 rental houses for 35 years. I kept them fully mortgaged, whenever the equity built up in a house, I refi'd, removed the equity, and invested in the SP500 Index. Eg, remove $50k - that adds about $280/m to my payment for 30 yrs ($102,000). The $50k placed at 11%/yr for 30 yrs is $1,100,000. I did that several times over my yrs of landlording.
Fri Mar 25, 2016 5:04 am
Cash: $ 3.90
Joined: 28 Jan 2016
Location: South Carolina
oldguy has a strong point about the investing route. The only counter argument out paying down the house early is peace of mind. It's a level of insurance that with the exception of property taxes, there is nothing that can take your house away. It's more important on a primary residence than on the investment properties, but owning feels better than having a lean.
I don't know too much about the types of loans. I've got the conventional on my house and will begin paying it down after my car is paid off, even though it's at the 3.75% fixes rate. But this is done after saving for my daughter's college fund, and after investing for my retirement.
Saving money is better than spending any way you cut it. Sounds like you're heading in a good direction.
Sun Mar 27, 2016 11:11 pm
werbarubin First Time Poster
Cash: $ 0.20
Joined: 30 Jun 2016
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