Would this be a good way to invest my money? (bonds, IRAs)

[Cas226]

So I'm 21 right now making 30k a year and in 4-5 years I will have hopefully saved between 40-50k. My boyfriend, whom I plan to marry after I get my degree, will have saved 60-70k in that time. Just Incase you were wondering, we both live with my parents and have virtually no bills other than car payments and student loans on my end, that's why we would be able to save so much.
So to the point.. If we bought a house, put down 80% on a 100k house then paid the rest within 5-10 years then bought a new house and rent out the old one.. Would it be worth it or are there other ways to invest our money?

[bmw335xi]

So you'll have $90k to $120k in 5 years.

You'll put down $80k, leaving you roughly $10k to $30k.

This is a bit tight here because buying a house will increase your liability such as property tax, insurance, maintenance etc.

You should have at least a 6 month emergency fund in your account.

It is hard to do research now because a lot can change in 5 years.

You will need to look at what rent can you charge, add up all your expenses, and see what return you can realistically receive.

I personally think you would be better off opening a Roth IRA and making your maximum contributions and then invest that money in some funds, stocks, ETFs etc.

[Listener2307]

We own rental property and have other investments as well. So it has worked out well for us.

But for you? I dunno. Depends on how willing and able you are to do the maintenance work on the house you are renting out.
We built our first townhouse. Lived in one side; rented the other. Paid it off, and moved on but kept the property. And like I said, it worked out.

Dunno where you are but in our area, we specialized in small homes which appeal to single mothers. It's hard for single mothers to find a two bedroom home, so we actually get calls to see if we have anything open. And that's nice. What I'm saying is we stay away from the standard 3 bedroom 2 bath properties because those types of homes attract people with teenage kids, extra cars, roommates and that kind of stuff. My friends with the standard 3-2-2 have nothing but trouble.

Now, after getting everything paid for and retiring, I rarely get a call from one of the tenants. We have good properties (don't buy junk!) with good tenants.

As for how much to put down and so forth, that's all a judgement call, and your judgement is probably as good as mine. Do the best you can, be flexible and make the plan work out.

[mysticaltyger]

Originally Posted by Cas226

So I'm 21 right now making 30k a year and in 4-5 years I will have hopefully saved between 40-50k. My boyfriend, whom I plan to marry after I get my degree, will have saved 60-70k in that time. Just Incase you were wondering, we both live with my parents and have virtually no bills other than car payments and student loans on my end, that's why we would be able to save so much.
So to the point.. If we bought a house, put down 80% on a 100k house then paid the rest within 5-10 years then bought a new house and rent out the old one.. Would it be worth it or are there other ways to invest our money?

Renting out houses really depends on your temperament. Here is a really great series of blog entries written for people considering this. The guy invests in residential real estate himself, but starts his first entry with why you may not want to invest in real estate.


Real Estate 101: Summary (Free Money Finance)

But yes, there are other investment options besides just residential real estate. You can invest in mutual funds. Normally, mutual funds invest in stocks, bonds, or a combination of both. I personally think the "balanced" mutual funds that invest in a mix of stocks and bonds are best for most people. Of course, there's nothing saying you can't invest in residential real estate AND mutual funds as well. Lots of people do that.

You should also learn about Individual Retirement Accounts or IRAs. If you designate your savings as an IRA, you can't touch the money without penalties...but there are tax benefits. There are 2 different kids of IRAs...Regular and Roth.

2012 & 2013 Roth IRA Basics

[Jamerican]

Originally Posted by Cas226

So I'm 21 right now making 30k a year and in 4-5 years I will have hopefully saved between 40-50k. My boyfriend, whom I plan to marry after I get my degree, will have saved 60-70k in that time. Just Incase you were wondering, we both live with my parents and have virtually no bills other than car payments and student loans on my end, that's why we would be able to save so much.
So to the point.. If we bought a house, put down 80% on a 100k house then paid the rest within 5-10 years then bought a new house and rent out the old one.. Would it be worth it or are there other ways to invest our money?

Ultimately it will be your decision, but since you are asking I can tell you based on experience ... and this is from someone that owns both rental properties and a primary place of residency. I understand the desire to payoff a home and not have to rely on paying a mortgage but you are very young and if you have great credit you can take advantage of this historically low interest rate, and a 30 year mortgage with a 20% down payment may not be a bad thing.

It is always good to use the bank's money while investing your own in some stocks, CDs, bonds, etc. However, I do not think it is wise to tie up that much of your own money into a house that is in reality a debt .... believe it or not. In the event that you need emergency funds then all your money would be tied up into something you really do not own while still paying a mortgage. If your payments are say $500 per month and you can afford an extra $50-$100 per payment, you would be surprised to see how much you can accelerate your payment and not take the exact 30 years to payoff your mortgage.

I know there are those out there that may suggest paying rent, but try not to listen to those folks and do what is best and smarter for you and your future. For the most part it is always better buying your own home because of the tax write-off and other benefits of being a home owner as opposed to paying your rent money into the pockets of someone else. Bottom line is buy if you can, do not tie up 80% of your life savings into a house because your house will build equity especially if it is in a covet and decent neighborhood. Reserve some of your money in liquid form for a rainy day or into interest bearing short term investments that are easily accessible and safe ....... also try to minimize your debt and you will be fine.

Good luck on your future marriage and I wish you and yours all the best and abundant success that life has to offer. Cheers!

[broadbill]

That sounds like a fine plan except for the student loans you'll have. My recommendation is to pay those off when you are young and get them out of the way before doing the real estate thing..

Its great you want to scrap together 80K for a home, but you are probably better off using that 80K for the loans first, then go after the house. The problem with houses is they tend to anchor you in one place. Why would you want to be anchored in one location at 25? Settle down when you are 30 instead...

I like your willingness to save money, I'd just use it differently.

[Listener2307]

Originally Posted by broadbill

That sounds like a fine plan except for the student loans you'll have. My recommendation is to pay those off when you are young and get them out of the way before doing the real estate thing..

Its great you want to scrap together 80K for a home, but you are probably better off using that 80K for the loans first, then go after the house. The problem with houses is they tend to anchor you in one place. Why would you want to be anchored in one location at 25? Settle down when you are 30 instead...

I like your willingness to save money, I'd just use it differently.

Yeah. Good advice. The OP is young and probably doesn't have much experience with life's willingness to jack around with us.

[thedayisbrave]

I'm 23 and in the process of doing something similar. I graduated without any debt, though, so that gave me a pretty hefty leg up. I would definitely pay off the debt as soon as you can and then re-evaluate. Home ownership has its highs and lows, but you certainly don't need to be in any kind of rush. Think it through. Do you have any plans to live in the place first? Either way, you might have to as I don't know that you could qualify for two mortgages based on your income; I'm thinking that's the reason why you want to pay off the rental first?

Read everything you can on investing - it will really help. Blogs too. I'd recommend Afford Anything. It CAN be done (I'm proof of that) but you have to WANT to do it. I spent my 23rd birthday shopping for a refrigerator because the one at the property crapped out. I didn't mind - but if that happens to you - will you? Other considerations regarding rental properties are potential cash flow and location (which are definitely tied).

If you have any more specific questions along the way, feel free to shoot me a PM.

[50topstocks]

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by Ken.

[jackielucky]

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