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Why don't you just pay off the house if you have THAT much cash and are only earning an average of .09% when your mortgage is 4.0%?
If I were you, I would pay off the house. Take the usual monthly payment and save it into a Roth IRA instead.
I also strongly recommend Petunia's advice of doing a one time contribution to some sort of retirement account and then investing the rest of the money (sans Emergency Fund) into a mutual fund.
If someone is terrified of investing I'd say keep 1 year worth of expenses as an emergency fund and pay off all your debt. Its not the best move with the money, but its a guaranteed 4% return by paying off your mortgage. Maybe ease back into investing with some 20 month CDs making you 3%, once you see the returns coming in you may feel more comfortable to jump into other investments. Def max a ROTH IRA, the long term tax benefit alone removes the risk.
Personally at your age I'd take about $100k and buy 4 rental properties with $25k down on each. I'd keep $50k in a business account for emergencies and vacancies on the property. If you can buy a home in your area for $100k and rent it for $1,000 a month you'll be spending about $525 on Mortage/taxes/insurance. Then I'd figure another $100 for emergency and repair, $100 for vacancy, and $75 for property manager each month. You'd be cash flowing $200 a month (more if you have good tenants that stay for a long time) and they'd be paying down your mortgage. You'd be making about 10% on your original $25,000 investment per unit in cashflow, not including home appreciation and the tenants paying down the mortgage. In 30 years you'll be hitting retirement age and you're 4 homes will be completely paid off which means you'll be collecting full rents, which would be like making $600-$800 cash on each property today or $2,400-$3,200 total. That coupled with your IRA and social security would make for a very comfortable retirement.
(Note: Realestate investing is not for everyone and you should do a ton of research before considering it, at least 6 months worth. At some point those properties are going to need new water heaters, septic work, roofs, etc. You have the capital to make it work and relatively stress free but you just need to go into it knowing you never have full control)
Maybe your spouse could become a real estate agent / property manager and could help save you big $ on those investments.
If your house is valued at 155k and you owe 89k, how is that only 6k of equity? Do you owe 149k?
I bought the house for 95K. It was under market value then because of repairs it needed. Housing prices in my town have increased 70% in the past year. They appear to have plateaued & are now rising at the rate you'd expect. I don't think they will fall significantly any time soon but you never know although I don't think the house will ever go to sub 100K values again given the growth we've seen.
I think the window of opportunity for me to buy rental properties has closed for the moment due to the rapid rise in housing prices - rentals go for top dollar too these days, I would have to sink almost everything into one purchase. There used to be duplexes or 4-plexes for under 200k but not any more. I would have to look at outlying areas for that where the returns would be much less.
Last edited by redguard57; 05-04-2016 at 12:55 PM..
The only reason to cut up cards and close accounts is if you have a total lack of self control(and possibly fees) otherwise keep the cards is a smarter thing to do
For what reason? What exactly would OP need credit for going forward?
For what reason? What exactly would OP need credit for going forward?
They are early 30s so who knows what might happen over the next 30-50+ years. What would they need credit for? Well just about anything really and having good credit especially if it cost you nothing is only a benefit. Can you really argue against that? Not in a rational manner you can not
They are early 30s so who knows what might happen over the next 30-50+ years. What would they need credit for? Well just about anything really and having good credit especially if it cost you nothing is only a benefit. Can you really argue against that? Not in a rational manner you can not
Who knows what might happen?
With a paid off house, a good income, and money socked away?
With a paid off house, a good income, and money socked away?
You provided no counter whatsoever. Please try again and explain in what scenario keeping good active credit history at no cost is a bad option or worse than shutting down all credit facilities
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