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I am posting this to get some unbiased advice to settle a friendly debate my wife and I are having about our financial plans for the future.
I am finishing up my fellowship and our current house income is ~$180k. We max out her 403b and both Roth IRAs. By the time my training ends we will be DEBT FREE except for our mortgage. What my wife and I disagree on is what to do next year with our income over expenses next year when I start making attending money.
Our minimum household income will be ~$400k (I am considering doing moonlighting through locums or telestroke which would boost the income). We have approximately ~$110k left on our mortgage for our condo (interest 3.99%) and it is valued at approximately $165k. The monthly payments including mortgage, taxes, HOA fee, insurance are $1k. After we max out our 403b x2, 457, HSA, backdoor Roth IRAs and emergency fund I anticipate that we will still have a fair amount of "extra money" to use for other investments or savings. This is where the debate starts.
My goal is to continue to "live like a resident" for the duration of my first contract (2 years). This means we would continue to live in our condo and not "upgrade" to a better house until I figure out if I want to stay at my employer long term. My wife wants to move out fairly soon after my training (but she is pragmatic so this is something she is willing to compromise on).
Option #1: Focus on paying off the mortgage quickly increasing the monthly payments to $3k. Use the rest of the money that is "left over" to place in a savings account to save for down payment for next house. (Note: Not cost effective to refinance as we would only be saving 0.4% with fairly hefty closing fees)
Option #2: Continue to pay minimum payment on mortgage and save all the money that is "left over" to place in a savings account to save for down payment for next house. The logic being that we will eventually rent it out so "other people pay for our mortgage."
Question for after we buy another home: How challenging is it to manage a rental property as a physician? Our tenative plan regardless of what option we go with above is to use our current condo as a source of income by renting it out. The current rental market suggests we could get paid $1200-1600 per month in rent. I fear that this could become cumbersome and costly if we get tangled up with unreliable renters. I have many friends who are skilled in the trades (HVAC, plumbers, carpenters, etc.) and would take care of the issues at a nominal fee.
Questions overall:
1. What have people's experience been being a landlord with such a busy profession?
2. Are there any good resources so that we can adequately prepare financially and mentally to become a landlord?
3. Has anyone used the route of collecting properties as your family grows? For instance, our condo currently fits our needs and we can reasonably pay it off in a short amount of time. Our next upgrade could include a modestly priced townhome that would be perfect for us + future 1-2 kids $400-550k that we could do a 15 year fixed mortgage but pay it off quicker than that. The next step could be a more expensive single family home that is bigger and in a great school district ($800k range) for when the future kids start school. This would be our "forever home" while making money on the 2 rental properties.
4. When saving for a home, do you suggest using mutual funds that would potentially offer better returns than a savings or CD acounty getting only 1%?
I am finishing up my fellowship and our current house income is ~$180k. We max out her 403b and both Roth IRAs. By the time my training ends we will be DEBT FREE except for our mortgage. What my wife and I disagree on is what to do next year with our income over expenses next year when I start making attending money.
Our minimum household income will be ~$400k (I am considering doing moonlighting through locums or telestroke which would boost the income). We have approximately ~$110k left on our mortgage for our condo (interest 3.99%) and it is valued at approximately $165k. The monthly payments including mortgage, taxes, HOA fee, insurance are $1k. After we max out our 403b x2, 457, HSA, backdoor Roth IRAs and emergency fund I anticipate that we will still have a fair amount of "extra money" to use for other investments or savings. This is where the debate starts.
My goal is to continue to "live like a resident" for the duration of my first contract (2 years). This means we would continue to live in our condo and not "upgrade" to a better house until I figure out if I want to stay at my employer long term. My wife wants to move out fairly soon after my training (but she is pragmatic so this is something she is willing to compromise on).
Option #1: Focus on paying off the mortgage quickly increasing the monthly payments to $3k. Use the rest of the money that is "left over" to place in a savings account to save for down payment for next house. (Note: Not cost effective to refinance as we would only be saving 0.4% with fairly hefty closing fees)
Option #2: Continue to pay minimum payment on mortgage and save all the money that is "left over" to place in a savings account to save for down payment for next house. The logic being that we will eventually rent it out so "other people pay for our mortgage."
Question for after we buy another home: How challenging is it to manage a rental property as a physician? Our tenative plan regardless of what option we go with above is to use our current condo as a source of income by renting it out. The current rental market suggests we could get paid $1200-1600 per month in rent. I fear that this could become cumbersome and costly if we get tangled up with unreliable renters. I have many friends who are skilled in the trades (HVAC, plumbers, carpenters, etc.) and would take care of the issues at a nominal fee.
Questions overall:
1. What have people's experience been being a landlord with such a busy profession?
2. Are there any good resources so that we can adequately prepare financially and mentally to become a landlord?
3. Has anyone used the route of collecting properties as your family grows? For instance, our condo currently fits our needs and we can reasonably pay it off in a short amount of time. Our next upgrade could include a modestly priced townhome that would be perfect for us + future 1-2 kids $400-550k that we could do a 15 year fixed mortgage but pay it off quicker than that. The next step could be a more expensive single family home that is bigger and in a great school district ($800k range) for when the future kids start school. This would be our "forever home" while making money on the 2 rental properties.
4. When saving for a home, do you suggest using mutual funds that would potentially offer better returns than a savings or CD acounty getting only 1%?
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