$235k Question, Putting It All Out There

[Breanna Green]

Hello Bigger Pockets Supporters,

I'm in some need of financial advice. I'll attempt to be brief since there's a lot of info to provide. I recently received a loan (30 year, 3.5% for $235k cash out refi tied to a property in San Diego which was originally paid off) in order to pay off this annoying personal loan ($235k, based on LIBOR with 3% "discount" tied to my stocks (long story)). I don't like the idea of a variable loan but at the time I didn't have a choice.  Historically, LIBOR over the last 5+ years has varied from .2% - 4% so at times I'm only paying 3.2% (LIBOR plus discount rate) and other times I'm peaking at 7% which is tough to beat from an investment perspective but not impossible. My initial thought was to pay down the loan and be done with it but then I started thinking what else could I do with the cash. 

Option 1:

I'm thinking of purchasing a small 1BD unit in Scottsdale/Phoenix, AZ because I'm from there and familiar (granted I live in Washington, D.C. right now) but the waived eviction notice and COVID puts doubt in my mind that spreading myself thin right now is a good idea. (I have 5 properties in total - 2 in San Diego, 1 in Scottsdale, 1 in Strawberry, and my primary in Arlington, VA). I'll explain San Diego below, Scottsdale and Strawberry are paid off, and I recently purchased Arlington in January so owe $700k, 3.75%, 30 year).

Option 2:

San Diego property is paid off in 2027. I receive $4500/mo for 9 months for student rentals and varied in the summer up to $12k/mo. I have $250k left on this loan at 2.5% interest. I always thought the best thing to do was have the tenants pay the loan off but mathematically if I pay it off now I would be in the black almost $60k/yr give or take which seems like a good idea and then I could pay off the personal loan in ~4-5 years as there's no rush per se I just hate the idea of this varied loan which could crush me if it hits that 6%+ mark and it requires a minimum for my stock balance or there's a maintenance call. So basically I worry in this market there could be another drop in stocks which forces me to sell low to pay down the loan.

So do I purchase in Scottsdale, pay off the San Diego home, pay off the personal loan as originally thought, invest in stocks, retain some cash and pay off X amount of loans, mixture of everything, do something completely else I haven't thought of...? Cash is king and once I pay off the loan obviously it's gone...

What is the best decision? Thank you all!