Invest money in the market or purchase 4 plex.

[Michael Martin]

Will be inheriting 90K in the near future and trying to figure out the best place to put it. My advisor wants me to put it in the market naturally. I am 55 years old in South Louisiana and have 7 other rentals. I am looking into purchasing a $165,000 4 plex in the area and thinking of putting down $33,000 towards the purchase and the remainder of the 90k in the market.  The monthly rent is $2525 with the expenses of $800 and the 30 Year note is $900 which leaves a positive cash flow of $800 monthly.  The advisor is saying that I have a lot of debt and wants me to focus on paying off some other properties with the next 10 years, I plan on retiring at 65.  

Looking for everyone's thoughts on this. 

[Denver McClure]

Hey @Michael Martin, at 55 with a plan to retire at 65, most advisors should recommend debt pay down and more conservative investments as you enter the wealth preservation stage of life. If the 4-plex is properly analyzed, and the data suggests $800/month cash flow after vacancy, Capex, and repair budgeting, then it sounds like a solid deal. I would suggest sharing the property analysis with your advisor to he/she understands the deal and properly add it into your financial plan.

The remainder of your inheritance should be directed toward conservative assets or paying down high interest debt. That strategy should be clearly outlined by your advisor. 

[Caleb Brown]

Deal seems solid. 10 years is a decent amount of time but you do need to weigh paying down debt. At 65 personally I'd want debt paid down or gone but it's not bad to add some more properties. How much debt is left on the 7 properties? 

[Clint Galliano]

My question is what kind of debt do you have? If it's consumer debt, that's one thing, but if it's debt on your rentals, that shouldn't matter (or at least as much). 

Make sure your advisor has a full picture of the contributions your rentals make to your finances and will make to your future finances. The proposed purchase sounds like a solid deal.

[Michael Martin]

The debt is mainly on my investment properties which is why I wasn't as concerned about the debt. I owe roughly 300k still on the rentals with a market value of 640k. 

[Rick Albert]

This forum is bias towards real estate so take it all with a grain of salt.

I'm always weary of financial advisers wanting to put money into the market. The first question I always ask is "how do you get paid?" Many of these financial advisors make money based on the portfolio and/or trades made. That's why I work with a fee only advisor. 

With that said, you own 7 other rentals, what does that look like? Are they almost paid off? If so, then the risk is mitigated if you decide to buy this fourplex.

If your goal is to retire in 10 years, where are you now? Could you retire now? How far are you from achieving that goal? If you are behind and this would be your last property to ever buy, I actually would consider getting the fourplex and then put the net profits into another investment (simple as high interest savings or even into the market). Especially because in 10 years, if you need cash, you could consider a cash out refi, the tenants pay the mortgage, and you just got money tax free. 

I would also consult a CPA to get their thoughts on what makes sense in the long run. There are different tax consequences for each. 

[Michael Martin]

I am not able to retire now. As I mentioned earlier, I owe 300k and book value is $640k. I think the same as you regarding putting the money in the market. Not sure what I will do but it is something I am seriously considering.

[Maz Pardhan]

Quote from @Michael Martin:

The debt is mainly on my investment properties which is why I wasn't as concerned about the debt. I owe roughly 300k still on the rentals with a market value of 640k. 

Are they cash flow positive ? Sufficient funds in case of large repairs ? If so then its really related to the investments and doesn’t effect you personally. Nothing to
worry about. 

your fourplex sounds like a good deal, although you’ve missed a few numbers. As long as those are covered and you have good cash flow I’d move on it.
the reminder of your funds could go into the market and diversify your investments. 

[Michael Martin]

The 800 a month includes HOA, water, garbage and Insurance.