Tyson is taking a year off of work and plans to devote some of his time to domestic travel, volunteer work, and bolstering his rental property portfolio. He originally planned to travel internationally, but won’t due to the pandemic. How does this plan sound?
Jace is wondering whether she should take advantage of the low stock market prices or keep a larger emergency fund due to the pandemic. Which is the better option, given her goal of financial independence?
Jace also wants to know: where do you park your money after maxing out a 401k and Roth IRA?
Venkat had to relocate after living in a condo for one year. He rents out the condo, but he’s in the red. Should he sell this condo? If so, when?
TW has $250,000 in cash that he can use to either pay off his rental property or purchase two more properties. Which is the better option?
I answer these questions in today’s episode. Enjoy!
TW asks (at 59 seconds):
I’m a single 39-year-old entrepreneur in a creative field. I’ve been playing catch-up since 2016 when I realized I had no retirement plan.
Since then, I’ve paid off $85,000 in credit card and student loan debt, and invested $100,000 into a few Vanguard target date retirement IRAs. My primary home is worth $365,000 that I owe $200,000 on at 3.25 percent interest, and a single-family rental property worth $240,000 that I owe $165,000 on at 4.25 percent interest. I net $600 per month from this property after paying the note, insurance, and taxes, but before maintenance and additional expenses.
Even though my industry has slowed down during the pandemic, I’ve continued to earn money and want to make progress towards my retirement goal. I want to be partially retired by age 50. I want to achieve this with five single-family homes with one or two completely paid off in the next 10 years.
The market hasn’t slowed down and I want to buy, but I’m concerned that we haven’t seen the economic impact of COVID-19 trickle down to real estate yet. Part of me wants to wait and see what will happen in the next six to 12 months.
I have $250,000 in cash sitting around. Part of me wants to use this cash to pay off my rental property, and another part of me wants to use it to buy two more properties. The numbers work out the same – either I profit $500 per month on three houses, or I profit $1,500 per month on one paid-off house. What would you do, and what haven’t I considered?
Tyson asks (at 16:29 minutes):
I live in Canada and I’ve worked in the education field for the past 15 years. I’m taking a deferred salary leave from July 2020 to August 2021. For the last five years, my employer has taken 20 percent out of my paycheck to allow for this.
My side hustle is real estate — I have seven rentals in addition to my primary residence. I plan to spend some of my time improving my properties and securing better rates for a few mortgages. I also plan to travel Canada in the fall and volunteer. Around that, I might pick up more rental properties and short-term work contracts, and potentially prepare to take another year off (when I can travel outside of Canada). What are your thoughts on this plan?
Venkat asks (at 22:24 minutes):
Last year, I bought a brand new one-bedroom, one-bathroom condo in downtown Austin, TX for $420,000. I had to relocate for a job, so I rented the condo out. The cash flow from the rent — $2,100 per month — doesn’t cover the expenses with the property. My PITI (principal, interest, taxes, insurance) is around $3,500 per month. I earn $200,000 per year, but I live in California and I’m paying $2,100 in rent.
I feel like I’m losing out on opportunity cost because having negative cash flow affects how I plan my other investments. I talked with my realtor who mentioned that we could sell the property for $440,000. This means I might break even or come out with a small loss.
Should I sell the property now, or wait another year in hopes that the condo will increase in value such that I can recoup my costs?
Jace asks (at 36:35 minutes):
I’m 24 years old and on the path to financial independence. Is it better to focus on investing when you’re young, or saving an emergency fund? While I don’t want to time the market, things are down, and I’m confident that by the time I want to retire, the stock market will have recovered. However, having an emergency fund in the current climate is important, too.
I’m single with no dependents and my net worth is $60,000 — a year’s salary. I normally keep a 3-month emergency fund of $10,000, but I have a 6-month fund of $16,000 right now. (My monthly expenses are $2,500.) Should I keep the $16,000 in my emergency fund, or invest the extra $6,000?
Additionally, I want to save $67,000 so that I’ll have $1 million for retirement, but where should I park my money after maxing out a Roth IRA and my 401k?
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