$131,000 today or $700 forever

[Will Lawburg]

Let's play a game.

You have a separate property that appreciated well. You can sell it now (make $131k after taxes and fees), or you can convert it to a rental property and make. $700/mo for the rest of your life.

Also, you have 100k in other debts that cost you $800/month (of 30k in car, 70k in student). Oh, and you have a few awesome kids

What do you do?

[Storm S.]

This is my take on it applying some investment banking to analyze this investment decision. I will make two assumptions you will die in 30 years and you can only pick from those two investment decisions. I also will not consider tax benefits or equity appreciation. For now Pretend no debt is owed. If you plan on reinvesting the cash from selling the property if you can earn a return greater than 5.4% a year on the 131,000 then you should sell the property if you can’t earn at least 5.4% a year, you should take the 700 a month for life. Okay now if you have the debt this isn’t just comparing two investments this problem becomes optimizing a portfolio the answer is simple sell the house other wise your losing money every month for 10 years vs being debt free and making money every month. The best thing to do is neither of these options. The best thing would be to do a cash out refinance for 100,000 to get a better return on equity and to clear the debt. That way you are debt free your cash flowing and you own the house and get all the tax benefits and equity appreciation.