I'm asking these questions now because I've learned to ask questions from those who have been before me.

To not monopolize your time I'll cut to the chase.

Personal:
I'm 29, married, no children. We do plan on having them at some point in the near future (3years or so). My wife definitely has the mentality to deal with tenants, contractors, the lot. She is a bulldog. I am more of a financial planner, legal type personality.

Finances:
We currently have approximately $1700 excess cash flow we are currently using to pay down all our non mortgage debt which is around $30K which should be done in a year or so (we pay extra on debt anyway). We are not investing the "recommended" levels into my 401k or IRA although I do invest some. We currently have about 3 months of expenses saved. My wife is currently in school (part of our $30K) and will be a teacher once she graduates (if she can find a job) which will net us an extra $25K or so which we will immediately put towards our investments as we a very mindful of lifestyle inflation. We both have credit ratings of 770+.

Talents:
We have done some remodeling on two of the three houses we've owned, with the largest projects being a new roof (self installed) and taking down a major load bearing wall (also DIY with advice of structural engineer). We have a decent idea of what things cost and can handle most handyman projects. My father in law is a sales rep (works from home, very flexible schedule) and is far more competent than I and is willing to be a backup handyman.

Expectations:
I have no delusions of grandeur. We currently have a rental (2 year old house with tenet "friendly" features like waterproof sub floors and burst proof pipes, 6% interest rate 105% LTV), albeit reluctantly. We had to move and couldn't sell the house for what it was worth. We have a Godsend in tenants as they are on government income and in the year they have rented have called us once because they were unfamiliar with GFI outlets, they are also homebody's. They stayed in their previous rental for 15 years. Our mortgage is $725 and they are renting it for $700. So we are still paying in some of our equity, but that's it.

I've also watched my parent's ups and downs from their duplex in a low income part of town.

Again, I don't expect any other tenants or houses to go as well as these have, and I am definitely looking for more net profit than that. Although I don't mind only pay a portion of our equity.

The Plan:
We always try to go with worse than average assumptions so we are trying to calculate what we should plan for on a 60% maintenance ratio and my wife never having a job and we have kids at some point during this process.

In 4-5 years we should have about 35K-40K as we want to boost our emergency cash to 6 months and crap happens that is unforeseen and might require us to dip into our "investment" money.

The average starter house (nice newlywed house, not run down) is only about $100K or so around this area. We want to buy a fixer for about $50-60K put 30% down and use what we need from the rest of the money to fix it up to average living standards. We will purposefully not make it a showcase house. Maybe spend 3 months trying to sell for the profit margin we want, if that doesn't pan out we would rent it. Rents average $850 for this price range of house in this area. So I would plan on $750 in rent money which should leave us with just over $100 profit.

Goals:
We want to retire comfortably, provide for our kids, and maybe have some money left over to give to charities that we care about as well as buy the occasional toy. We currently live on about 60% of my income so we are used to being thrifty. Anything above and beyond that will be icing on the cake.

Questions:
How much should I calculate in kids taking a bite out of our plans?

Are my projections about right?

Should we have more than 6 months of emergency cash?

I've heard that HUD or low income properties, while cheaper, have much more headaches, ergo my nice starter home idea?

I honestly have not researched this enough so feel free to ignore this question: What finance options should we be looking at to properly leverage our money and credit

Should I put more into my 401k / IRA?

Should I use our $30K to refi our existing rental instead?

Our current home is financed at 4.5% at 90% LTV. I have no plans on paying this off early because we are going to sell in 5 -10 years or so anyway. Am I wrong?

I have assumed with our credit we can get a 6% interest rate for an investment property in this current market. 5 years from now? I'm thinking 10-15%, too much, too little?

What am I missing?

Thanks ahead of time for any input.

2 Votes

12 Replies

Jump to Last Reply

Planning for the future, holes needed for my theories

Most Popular Reply