Long term investment advice

[Rick Curtis]

Looking for some advice.

I live in CA and I am eligible to retire in 8 years. My primary residence is currently valued at about $675,000 and I owe about $250,000. My loan is a 15yr and I pay extra each month with the goal of paying it off by the time I retire.

I have a rental property in Boise I bought in Dec 2016 for $230,000. The current value is about $350,000. I recently paid off the loan and my rental income is now $1,700 a month.

I have about $50,000 in available cash to invest and am able to save about $4,000 a month.

My goal is to retire out of state (Idaho or Montana) when I turn 50, which is about 8 years from now. I do not want to be dependent on market conditions when its time. I am in a CAL PERS retirement system but I want to increase my monthly income upon retirement. I want to have a nice retirement home on at least 10 acres of property. I would guess this will cost me between $750k - $1M when the time comes.

I am looking for advice on how to proceed.

1. Sell the rental property, which would allow me to pay off my primary residence and have about $100k leftover. This would then allow me to also save about $9k a month and look for opportunities to either buy investment property or buy land to build on when I retire.

2. Keep the rental property and work to pay off my primary residence as quick as possible (5 yrs or less). After the fact I would be able to save about $10k a month. This would then allow me to look for investment properties, buy the property I want, or save for the eventual property/house I buy for retirement and keep my primary and rental as two rental properties for additional sources of income.

3. Keep the rental property, stop paying extra on primary residence and look to buy another investment property.

Any advice is greatly appreciated.

Rick

[Jonathan Taylor Smith]

What are your current interest rates on the mortgages for both properties?

For me, I've owned a home for 18 years that we've been paying off since 2002. But because of the current market condition (causing that home to now be worth more by far than it ever has, and interest rates being at all-time lows) - my wife and I decided to sell that home now to capture that equity as cash before the market changes and it goes away.

We had already bought another distressed lakefront house that we fixed-up beautifully - so that is now our new primary residence. We will refi that lake home (pulling out cash based upon its new value) - and we will also consider refinancing some of our rental properties to lock-in these low rates for 30 more years. And we'll use all the resulting cash from the sale and refi's to buy more properties.

Is it better to own 5 properties "free and clear" that bring in $1K each per month; or to own 20 properties with mortgages that each bring in only $250/mo? Same cash, but I'd argue strongly for the latter, as there is really no such thing as owning a house "free and clear" - since you'll always have a perpetual lien against your property called property tax and maybe even an HOA.

So my advice ($0.02) is to use this all-time low interest rate debt (that may not be here long and may never come again) - to increase your portfolio and allow your tenants to pay it off for you over the next 30 years with ever less-valuable money (due to inflation) than the money you're borrowing today. And you're sure to be increasing rents nearly each of those 30 years while your mortgage payment (PI) remains the same.