Current house or buy rental with extra money?

Question

So I sold an asset recently and now have an 40k I can play with. My wife and I have been talking about a beach house these last few years so that is my first instinct to go in 50/50 with her parents and buy one to rent out. I have been watching some YT videos last couple nights about the FIRE movement and now has me thinking. My current house we owe about 180k currently and we put down 20% 3 years ago. I bet we could get close to 300k for it if we sold now but don't plan on selling anytime soon. I also don't plan on staying at this house when I retire and would like to live at beach when that time comes. Not sure what additional info anyone needs but I would answer if someone has a question. I am thinking since I am on a rental forum that I know what the answer people will give but just wanted to ask anyways. Currently I don't put anything extra toward principle and did 30 yr mortage

Will Fraser · Answer

Hi @Jacob Stephens, welcome to the Biggerpockets forums! As a fellow FIRE-walker I understand the tension and pull you may feel in this: pay off your current debts early (so that you can be free) or put the capital to work on investments?

That debate rages deep within the FIRE community, so I'll focus on two wholistic factors here:

• The debt you have on your personal home is (hopefully) long-term fixed rate debt. Currently rates are below the rate of inflation and holding those debts seems highly advisable to me since every dollar paid to them outside of what is necessary is relegated to a rate of return that doesn't even cover the "rate of inflation" (nevermind the real rate of inflation). If possible I like to make it so that my long-term-fixed-rate debt is working for me on investment properties (like house-hacking, refinancing to pull equity out and put that into rental property investing, etc), but even if I wasn't going to "investify" my personal home I would find an alternative way to use my extra money that achieved a higher rate of return.
• If you invest, invest. If you want to buy a vacation home and it happens to be something you can rent out, that's awesome! It is not, however, a good investment. It is a good lifestyle purchase with a side dish of investment bonus. I want to encourage you to think clearly about that because many a wanton purchase has been made and washed under the rug under the premise of "but babe, we can rent it out and . . . ". If you want to eventually have a beach house and live there full time, what would it look like for you to go "pedal to the metal" in real estate investing for a few years and then buying whatever beach house you want when you're ready to relocated there?

Food for thought

Current house or buy rental with extra money?

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