All Forum Posts by: Alex Kosley

 I am able to contribute and I have the match, I have yet to see a detailed reason proposed as to why this should be my first target other than security in case of job loss (which is fair) but nothing financially. 

Thanks for the feedback Travis, to clarify the interest on the 401k loans is paid to myself. It is not money out of my pocket, the interest is deposited into my 401k fund - effectively an increased 401k contribution; just have to pay interest until the loan is fully paid off. The way I see it, is the cash flow I lose paying this monthly worth paying off (might as well be a 0% interest loan) to increase monthly flexibility? Or, should I have less flexibility monthly and invest in a long term rental? 

401k loan takes $ directly out of each paycheck, the interest is paid to ourselves. Though high rates, we keep 100% of the interest paid, we used it as a cushion to buy our current home in order to rent out the first home. 

I am a 29 year old male, married, with joint income living in Dallas. My wife and I bought our first home in Feb. 2020 for 360k (4bd/2ba), worth roughly 500k now. We were fortunate to save enough to buy a new primary home this summer and upgrade (850k - better schools, neighborhood, location, etc.) and are now renting our first home for 3k a month to a young family with kids (roughly +$500 cash flow/mo). The first home was a 10/1 ARM at 3.39%, we anticipated paying off the home in 10 years so we took the lowest rate at that time. We currently have the below "bad debt" positions:
Student loans - 50k (6%)

Car loan - 29k (7.09%)

2nd lien (current primary home) - 80k (6.08%)

401k loan - 30k (9% - paid to yourself)

401k loan - 20k (9.25% paid to yourself)

Household income of 267k (not including bonus), roughly 100k cash currently and save around 6k a month not including yearly bonus's (33k + 14k = 47k net/yr) + 72k/yr (6k/mo x12) savings = 119k total net savings per year (rough estimate not including current rental)

Should we pay off existing debt with the exception of our home loans (not including 2nd lien) or invest in a 250k townhome* that can rent anywhere from $2,000-$2,750/mo? My goal is to be financially free and ultimately leave my W2 through scaling rental properties to manage/invest full time. I am fortunate to be in this position as is, but want more for my (now growing, first kid on the way) family to give them the best. 

What are your thoughts on what I should do?

Investment Info:

Single-family residence buy & hold investment.

Purchase price: $360,000

First primary home bought prior to pandemic, buy to hold and currently renting to first tenants on a 12 month lease with potential to extend to 18 months.

What made you interested in investing in this type of deal?

Moved to a new primary home to a better neighborhood we plan to stay in long(er) term with better schools. When originally bought it is in a good and growing neighborhood (many flips, etc.) appreciating well and is the entry level neighborhood of the greater neighborhood - good rental opportunity for young families and proximity to city.

How did you find this deal and how did you negotiate it?

Standard young first time home buyer, found it on zillow/realtor. Thought it was good value after tracking the neighborhood for awhile, offered just below list and asked for the fridge, dining room table/chairs and all outdoor patio furniture/TV.

How did you finance this deal?

Contacted many lenders having no clue what to do, went with the best option after learning through discussions. Ended up being a portfolio 10 yr ARM, we did not intend to be there that long and knew the area would appreciate. I would have done a 30 yr except likely we will refinance anyway to cash out at some point, or best case, pay it off at the 10 yr.