You are still relatively young if I remember correctly. Given that I would stash it away. I know you are living high on the hog now but it is just additional insurance that you may or may not need.
Yeah you're right. Seriously, I think it will be a combination of the two options. Believe it or not it's hard for me to spend money. If it was upto me I wouldn't have half the possessions I have. Alas, with a wife and kid comes additional stuff both necessary and not so necessary but enjoyable none the less. I am basing my retirement needs on how much it would cost me to live in the states. That way I can bounce back and worth between Panama and the US without financial hardship.
And with Arif every post I have to pepper you with a few questions. About how often do you come across a property that fits your criteria? And you mentioned that you buy in the not so hot areas, have you ever had problems selling after a rehab/investment in the not so hot areas?
I found a bunch of properties that meet my criteria. It's getting to them first that's the hard part. So far this year I have 5 properties in my "missed it" folder and 1 in my "won" folder. The year is still young and I plan to do atleast 6-7. Last year we bought 3 homes to rehab and we sold 2 in addition to working at my JOB. The third one I held off on selling due to taxes. It's for sale this year and should have a contract on it soon.
Let me clarify on the "not so hot areas." What I mean by that is the city and neighborhood is average without 20-30% appreciation per year. You might get 5% if you're lucky. What I do is find properties that need $2k-5k worth of work selling for 70-80 of their value. Last year it took me about 6 months to sell each house. It is very expensive to rehab and sell homes. I spend about $15-20k on just transaction costs (realtor fees, 2 closings, mort. pmts, termite inspections, home warranties, etc.) which usually runs way more than the actual fix up costs.
We've never had a problem selling the properties as I try to buy homes in nice neighborhoods that I would live in. Some are nicer than my home. I spend a lot of time analyzing each property and am never 100% sure of how it will end. Usually 80-90% sure it will be a successful project. Then you factor in the guy who wants to buy the house with $500 down and you're praying the entire way to closing that the deal goes through.
My rentals on the other hand are a different story.