Ross and his wife are both in the Navy. They bought a home while they were stationed in Hawaii. Then the Navy sent them to Virginia, where they currently live; they’ve purchased a home there, too. They kept the Hawaii home as a rental property, and they’d like to move back into it when they retire. Which home should they repay first?
Mike is 33, debt-free except for his mortgage, and earns more than $200,000 per year. He saves half of his income. What should he do with his savings? Pay off his mortgage? Invest?
Josh has a nervous habit of checking his investment account balances daily. How can he break this habit?
Amanda and her husband live in a duplex. They have $115,000 in equity in their home, and another $115,000 remaining on the mortgage. They’d like to move. Should they hold the duplex as a rental? Or should they sell and use the proceeds to buy a cheaper home, with a goal of being mortgage-free?
Christy wants to know how to compete with other aggressive real estate investors who are bidding on homes.
I answer these five questions in today’s episode. Enjoy!
Here are more details:
Mike asks:
I’m 33 years old and I own a home with $322,000 remaining on the mortgage with an interest rate of 3.6%. This is my only debt, and my salary is $205,000/year. I save 45-50% of my take-home income while maxing out my retirement contributions.
With my extra cash, is it smarter to pay down my mortgage, or invest in index funds? I’d like to have a rental property within the next five years and be financially independent at 50.
Amanda asks:
My husband and I live in a duplex in a desirable part of town, where homes are selling for around $230,000, and renting for $1,700/month. We have about $115,000 left on our mortgage, so I’m not sure how the one percent rule and cap rate factor into the equation. I’m interested in keeping our home as a rental, but my husband would like to sell it and invest the equity into our new home. We would both like to be debt-free and mortgage-free as soon as possible, but I think keeping the home as a rental is a good idea for the cash flow.
Ross asks:
My wife and I bought our first property together in Hawaii (we were stationed there in the Navy) in May 2016. We relocated to Virginia in June 2018, but we kept the property in Hawaii as a rental. Once the operating costs are accounted for, this property costs us $450/month. The reason we’re holding onto it is because we hope to move back when we retire in 10 years.
We’re closing on a primary residence in Virginia, but in 2-5 years, the Navy will likely move us again. When that happens, we plan to keep this property and convert it to a rental property as well.
We’ve ran the numbers and can either pay off the Hawaii property in 9.5 years, or the Virginia property in 4.5 years. Do you see a benefit in choosing to pay off one before the other? My initial thought was to pay off the Virginia home so that by the time we leave, the cost of owning it as a rental will only be insurance, taxes and maintenance. However, the thought of having the Hawaii home paid off when we retire is appealing. What else should we consider here?
Josh asks:
How often do you check your accounts, and for what purpose?
The reason I ask is because I’ve developed a nervous tic of checking my account balances multiple times per day. This has brought on some anxiety. I don’t have a reason for checking … I’m in this for the long-term, not a quick buck.
Christy asks:
What other real estate resources can you recommend to us since you’re no longer doing your real estate podcasts? I’d like to listen to someone with views that are similar to yours. I don’t want to build a real estate empire – I just want it to be one part of my portfolio!
Resources Mentioned:
Today’s episode is sponsor-free. Instead, I wanted to take a moment to give you an update on Your First Rental Property, my real estate investing course.
As many of you know, after three years of development, we launched Your First Rental Property in April 2019. It’s a 10-week course for beginner rental investors, and the first cohort of students graduated on June 21st, 2019.
We have modules covering every aspect of the investing process:
- Analyzing
- Finding
- Financing
- Renovating
- Buying and Negotiating
- Building a Team
- Tenant Management
What can you expect to get out of the course? Good question. You’ll gain:
- the confidence to finally purchase your first rental property
- valuable knowledge that will prevent you from making expensive mistakes
- clarity about your investing strategy so you can focus only on what makes sense for your situation
- lifetime access to both the course and our monthly live ‘Ask Me Anything’ Office Hours sessions (where you get direct access to me)
- the option to learn alongside your fellow students with accountability groups
The course also includes a bunch of quizzes, worksheets, spreadsheets, and checklists, along with an exclusive forum so that you can learn from and network with fellow students.
If you’re interested in learning more, sign up at affordanything.com/viplist. You’ll be the first to know when enrollment opens again!
