What to do with an extra $100k

[Anonymous]

So, we are moving out of the area and have an extra $100k to invest. Should we,
- pay off the mortgage of one our rental properties (would net an extra $750 per month) and then max out TSP,
- divide it equally among 3 529 plans (oldest child will be turning 5), or
- invest the $100k in the regular market.

HHI is $110k with SAHM. Both of us are in our mid-thirties. Have over $550k in retirement accounts, $50k in 529 plans, $100k in brokerage, $130k in bank accounts, 2 rental properties (both cash flow positive and gross over $3k per month), and new primary residence (which won't be our forever home so we have no desire to pay it off). We max out 2 Roth IRAs each year and contribute 10% to TSP and $9k to 529 plans. Our plan was to use one of our rental properties to pay for college (one is valued at $250k/owe $100k, the other is $290k/owe $180k). Both were purchased before we had kids.

[Anonymous]

If your primary house is paid off and you have the 6-8 month emergency fund, I would put it into the 529 plans.

[Anonymous]

I think it depends partly on where the rental properties are located - is the market stable in that area?

I would personally not put the money into the rentals - it sounds like one could be paid off before college anyway. I would invest the 100K in the regular market for the time being. If you are concerned about the 529s then I would put the 100K there instead, but it sounds like you already have a plan for college and it may not be necessary.

[Anonymous]

Anonymous wrote:I think it depends partly on where the rental properties are located - is the market stable in that area?

I would personally not put the money into the rentals - it sounds like one could be paid off before college anyway. I would invest the 100K in the regular market for the time being. If you are concerned about the 529s then I would put the 100K there instead, but it sounds like you already have a plan for college and it may not be necessary.

I agree and would put it in the brokerage account, unless the interest rates on the rental property mortgages are unusually high. And congratulations for being in such good shape so young.

p.s. To maximize tax benefits for 529s, you could consider having two for each kid, one from each parent.

[Anonymous]

If your 529s are earning the same return as ours, then it sounds like you'd net more by paying off the mortgage on one of your rental properties.

[Anonymous]

What are the mortgage rate on your properties? I'd probably max out the TSP first. Then contribute to the 529 plan.

I'd probably invest the rest if the mortgage rates are low. If they are high, then I'd consider paying down one or paying it off. Although paying off the rental one will have different implications than paying down the primary house since the rental mortgage is used as an expense in your rental business. While paying it off will free up some money, it will also increase your business income, so look at the tax implications of that.

[Anonymous]

OP here. Mortgage rate for $250k property is 5 1/8% and for $290k property is 4 3/8%. We know there will be tax implications, which is why we thought maxing out TSP would help offset the increase. Also, forgot to mention that there will eventually be some family money for college (a trust from my family) but we are unclear on the amount. Thoughts?

[Anonymous]

How do you have all that saved on HHI 110???????????

[Anonymous]

Anonymous wrote:How do you have all that saved on HHI 110???????????

+1000

[Anonymous]

Anonymous wrote:

Anonymous wrote:How do you have all that saved on HHI 110???????????

+1000

Bwahaha... she should talk to that 300k HHI person who is pacing a hole in the floor with her "woe is me".

[Anonymous]

OP here. When we got married 9 years ago, we just decided to live off one salary. So, for the 6 years I was working, we saved $80k-$110k each year. We've also made some great real estate investments for our primary residences. We move quite a bit and have bought in up-and-coming neighborhoods. After fees/improvements, we've probably netted an additional $150k+ (I literally track every penny spent on a home, so my figure is really conservative--grossed is over half a million).

[Anonymous]

Anonymous wrote:OP here. Mortgage rate for $250k property is 5 1/8% and for $290k property is 4 3/8%. We know there will be tax implications, which is why we thought maxing out TSP would help offset the increase. Also, forgot to mention that there will eventually be some family money for college (a trust from my family) but we are unclear on the amount. Thoughts?

Those are higher than market and you should consider refinancing.

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. Mortgage rate for $250k property is 5 1/8% and for $290k property is 4 3/8%. We know there will be tax implications, which is why we thought maxing out TSP would help offset the increase. Also, forgot to mention that there will eventually be some family money for college (a trust from my family) but we are unclear on the amount. Thoughts?

Those are higher than market and you should consider refinancing.

Not really. Mortgages for investment properties typically run .5-1% higher than owner-occupied mortgages and have higher fees.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Mortgage rate for $250k property is 5 1/8% and for $290k property is 4 3/8%. We know there will be tax implications, which is why we thought maxing out TSP would help offset the increase. Also, forgot to mention that there will eventually be some family money for college (a trust from my family) but we are unclear on the amount. Thoughts?

Those are higher than market and you should consider refinancing.

Not really. Mortgages for investment properties typically run .5-1% higher than owner-occupied mortgages and have higher fees.

We were quoted .25% more than our principle residence recently.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Mortgage rate for $250k property is 5 1/8% and for $290k property is 4 3/8%. We know there will be tax implications, which is why we thought maxing out TSP would help offset the increase. Also, forgot to mention that there will eventually be some family money for college (a trust from my family) but we are unclear on the amount. Thoughts?

Those are higher than market and you should consider refinancing.

Not really. Mortgages for investment properties typically run .5-1% higher than owner-occupied mortgages and have higher fees.

We were quoted .25% more than our principle residence recently.

Please share! We are always looking for a better rate.