Getting my financial ducks in a row - need your advice

[Ryan Pederson]

Before I even start investing, I have some areas of my financial situation that I'd like to get some perspective on. Thanks in advance for the feedback!

1. Existing 401k/Employee Stock Purchase Contributions - For almost the past 5 years I have been investing 15% of my pre tax income in a 401k plan and my company matches at 6%. Additionally, I've been investing another 5% of my after tax income in a company stock program where I purchase shares every 6 months at a 15% discount of the stock price on the last day of the 6 month period.

In order to start saving some cash to invest in real estate I'm going to have to cut back my contributions. The question is how much? How many of you are contributing to a 401k at all or invest in the stock market in addition to REI? I've done pretty well with my company stock, so I'm planning to keep my 5% contribution, but like most people my 401k took a beating over the past 12 months. I have almost 50k in my 401k right now, and would like to get your thoughts on pulling some of that money out to use for REI, even though there are some big penalties for taking that money out early. Would it make sense to cut my contributions down to 6% and keep my company's maximum match? I'm a little conflicted on what to do and would love to hear some options.

2. Renting out the house I own and currently live in - I currently own a 3 bedroom, 2000 sq. ft. townhouse that I live in by myself. I'm not married and don't have any kids, and I travel quite frequently for my job, so I'm not home all that often. I'm considering asking two of my buddies if they would be interested in renting the other 2 bedrooms, which would put anywhere from $1000-$1400 a month in my pocket depending on what I decide to charge them.

I'm pretty sure most of you would say this is a no-brainer, but would like to get your perspective on having your friends as tenants and the potential pitfalls that would go along with that. Also, I've lived in my house for 2 years already by myself, so it would be an adjustment to go back to living with roommates, so that is the other thing that is potentially a negative.

3. Refinance my existing mortgages? - I have 2 mortgages on my townhouse right now, the 1st is $160k on a 30yr fixed @ 6.25%, the 2nd is $40k on a 30ry fixed @ 8.875%. I bought the property in 2007 for 205k and I'm pretty confident that I'm not underwater. Some units similar to mine have sold for $235k in the past 6 months.

I'll admit, this is new to me, so would love some advice on where to start. Would it make sense for me to consolidate to a 15yr fixed loan at a rate likely in the 4's even though the monthly payment would be higher? Or would it make more sense to refinance to a lower 30yr rate and not be forced to make the higher monthly payment. Obviously I could pay down the principal more each month if I had the cash. Adding the roommates would help with the 15yr option. Wells Fargo called me on my big loan and said they would refinance to 5.2% with no inspection, appraisal, or closing fees, but I guessing I could find lower if I shopped around. Thoughts?

Overall, I think my financial situation is pretty solid right now. Really my only debt is my mortgages and I have about $1000 bucks combined on a few no interest credit cards. I have no car payment, and no student loans. I'd like to make some decisions fairly soon on the areas I mentioned above, and I think I'll be set up nicely to have the cash available to make a rental property purchase. Thanks again for your feedback.

Ryan