Personal Finance Advice

[Jason M.]

I found some similar posts, but I also had some specifics that I would like to try and get cleared up. I am new to investing, in the Denver market, and looking for the right time to buy. I believe that we are about to enter a recession, if we haven't already, but COVID and the possibility of a second shutdown throw in a lot of unknowns that may not play out like past recessions.

Catalyst: I expect a roughly 65K inheritance around mid-July.

Option 1:

Pay off high interest debt and increase monthly disposable income; Save for a property 12 - 18 months from now.

$33K consolidation loan @ 9.9% ($1365/mo)

$15K 401K loan (Currently on pause until December. $940/mo for 16 more months. Interest is paid to my 401K.)

This leaves my primary mortgage at 2.75 %, and a leased truck payment. (Up in October and refi for ~400/mo. or 24K buyout.)

This plan would leave me $2500-3000/per month to invest after bills. (Current plan $2K to savings and 500 to E*TRADE, until I get enough for a down payment.)

Note: I am already maxing out tax advantaged accounts. (401K and HSA; ~$2200K/mo)

Option 2:

Us the $65K to buy an investment property and continue to pay on the debt. This leaves me $500-1000 disposable income to save/invest.

In the Denver market I would probably need around $50K to get started, leaving a 15K savings buffer.

Conventional wisdom says that heading in to a recession you should pay down high interest debts and save. But recessions can cause property values to drop and might be an awesome time to invest. 

If the interest on my debt is 9.9%, there is a good chance I could do better than that in CoC ROI + appreciation with a self managed rental property under $300K.

Thoughts?

[Nicholas L.]

@Jason M. I like paying down the debt.  Timing the market is difficult - I don't think it's clear at all what is going to happen to the real estate market as we head into fall and winter, so I wouldn't worry about "missing" an opportunity.  On the one hand, it seems like the recession would cause prices to go down, but on the other, supply in the places where people want to lives remains constrained.