[USER]

If you had $280,000 in HYSA and you had the following situation, what would you do with the funds?

$110,000 owed rental property 7%

$155,000 owed primary residence 3%

12 month emergency fund would preferably be $60-70k.

No other debts.

Would like to purchase 3 more rentals in the next 10 years. On track to hit all financial goals – coast fire by age 50-55 as planned.

Cash flow of $100k in addition to max retirement savings each year.

Already maxing retirement accounts each year and balance is at $850k at age 40.

I was leaning towards paying off the rental property but not sure and not sure if extra funds should go in taxable brokerage, paying off the house or emergency fund.

[Michelle]

1, you didn’t share any long term goals and if you’re on track to them
2, you should always have an emergency fund so carve out whatever is needed for that for sure
3, without knowing the rest I’d say set aside the emergency fund, pay off the rental, invest the rest in a taxable brokerage account

[Tony]

Taxable brokerage 100% low cost index funds. Let the tenants pay off the rental property.

It’s their job.

[Jennel]

If you want to buy more rentals put the money towards that and include that information in your original post.

I have a hard time believing anyone who says to pay off the rental also have rental properties.

Most people who own rentals and plan to acquire more would not recommend tying up all your cash in one property.

Make sure that property has its own emergency fund.

[Amanda]

Are you wanting to buy more rental properties? If so, you might want to keep the liquidity for that.

Do you have anything in nonqualified brokerage accounts or are you just wanting to start some?

Are a portion of your qualified accounts Roth accounts and if not, have you considered a conversion on a portion of them?

I would lean towards paying extra on the rental property but not paying it all off at once, starting a NQ brokerage, and of course keeping your EF in HYSA or TIPS, CD ladder, etc.

And make sure you have some of the investments in Roth 401k or Roth IRAs, though it may not make sense to convert.

[Rick]

The 7% is appealing but has two things working against it. First is loan pay down is not a compounding return.

Second, it is likely over its remaining term that it will be refinanced lower making it more likely a 5% or 4% loan.

A non compounding 4-5% rate that tenant pay for you (non taxable income to you)…ehh I would not be in a rush to get rid of that.

Regular brokerage with a focus on tax smart asset classes and specific holdings would be the route I would go down.

[Tony]

Pay off rental. Keep personal home mortgage. The rest for down payment.

If you run into problems the one paid off rental will help you float.

[Adam]

I’d vote for taxable brokerage. This provides more liquidity and accessibility and creates long term capital gains or qualified dividends income vs rental income (ordinary income).

The interest on the rental mortgage is also deductible.

Consider trapped/illiquid equity as it’s own form of risk.

[Jennel]

Brokerage account then emergency fund. Let the tenants continue to pay off the rental.

[Author]

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