[USER]

Looking for words of wisdom?? As we’re fairly new to FI journey.

Rental property mortgage $198k ($1300 mortgage monthly payments) $1000 profit – it was our first home purchased
Current home mortgage $359 (2750 monthly payments) 7% interest rate – bought in 2023

We just paid off our car debt $28000
No other debt

Emergency fund $7000

We’re exploring options, one is to sell our current house and buy something cheaper or rent while we save to build our dream house and keep our first home as rental property and pay it sooner.

Annual Income $103k

What should be our next step if we want to reach FI?

Sell our current home or keep it ??

We dream to have a 500k house one day, how we start working towards it ?

Or we should forget about it and focus on paying our rental property and current home??

Thank you in advance!!!

[Enilda]

You just bought the house, selling it would be losing thousands in commissions, if you can even sell it for what you bought it.

That’s not a smart move.

Most people on a fi journey don’t buy a larger home, they live an affordable lifestyle so they can save for retirement.

Do you have kids, will you need to downsize once kids go to college?

[Lisah]

Don’t you need more of an emergency fund? Do you have any brokerage or retirement accounts?

Your current house will be 500k if you just wait.

[Chris]

Do you like being a landlord? What are your goals? Is the total income inclusive of the rental cash flow?

Is the income gross or take-home?

[Golden]

Just stay in your house. It will become a $500k home through appreciation. You don’t have to move.

Your emergency fund sounds pretty low. You should build that up to 6 months to a year of expenses in cash.

For your rental, are you sure you have positive cash flow after all expenses?

You have a mortgage on the rental.

If you don’t mind all the work as landlord and surely you have positive cash flow, probably keeping it is ok.

[Catherine]

Where is your retirement funds at outside of your EF? 401K, Roth IRA, brokerage account?

what are your annual expenses?

When do you want to retire?

[Amanda]

Since you bought your current home last year, it would be costly to move at this point.

If you hate your house, it may be worth it anyway.

You didn’t talk about any of your other expenses or income or other assets.

That will be key to figuring out how far from financial freedom you are.

[Dan]

I think there are a lot of options at play here. I’m a real estate investor and stock investor and love the combination of both.

But like it’s said, you can afford averaging but not everything.

Every dollar in real estate isn’t in the stock market and vice versa.

Are you operating your rentals efficiently and maximizing the return on them?

Are you maximizing the tax benefits of your real estate?

Are you investing aggressively but in a prudent strategy?

[Suzanne]

How much has the rental property appreciated since you turned it into a rental?

If you sell the rental, you will owe capital gains taxes on the appreciation.

You can avoid that if you have lived in the home 2 out of the last 5 years.

Depending on how much the property has appreciated, it might make sense from a tax perspective to move into your rental for two years.

This assumes that you bought the house prior to the huge run up of home prices, and it’s worth considerably more than you paid for it.

[Author]

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