Investements for a young dude.

[cshaw07]

Hey guys, I think some of you saw my post asking about rental properties and stuff but for the ones who didn't, here is some info.

age 23, single

Income - $50,000
rental income - $1,500/month

mortgage - $624
loan on 1st and second rental - $24,000
loan on 3rd rental - $25000

Personal loans/Credit Card - totaling $17,000ish

First step is to pay off the 4 personal loans and save up about a $10k emergency fund. I am in the process of buying a duplex, (income $800/month, cost $280/month) So my take home pay will be about $4780/month with all rentals rented. I'm planning on paying the minimums on all loans except my 4 personal ones until they are paid off. I plan to have all 4 gone and paid by 01/01/2014 and I think it's do able. Now to my questions.

I'm for sure opening and fully funding an IRA as soon as those loans are paid off (personal loans = $550/month in payments ).

I'm currently only putting 5% of my checks (employer match 5%) into my 401k.

I have the ability to fully fund a 401k, fully fund an IRA, and then have some to spend and still save a bit. But I'm only 23, should I actually be putting that much into my 401k every year? What worries me is the inability to access my money if need be. Are there better options for me? I am doing really well with my rentals, but I'd like to take a little break from buying and renting propertiesfor now. Maybe take a year off (i do plan to go full time, but want to get more practice in first haha)

I guess my bottom line question is: What should I invest in that will give me growth for the future yet also liquidity incase of emergency? Is there an option?


Thanks!

 

[hlfo718]

Keep your current 401k of 5% and any excess cash after you have paid off your loans you can simply stick in index funds from Fidelity or Vanguard. Index funds are tax efficient since they rarely make cap gains distributions. If you want to add bonds, you can get a vanguard bond fund in your Roth and if you want more fixed income, you can buy I-Savings Bonds directly from Treasury Direct. Ibonds are great because it pays no less than CPI and is tax deferred until you cash out, which can be 20 or 30 years from now.

Make sure you diversify your rental properties into diff neighborhoods.

 

[Animorph]

Contribute the minimum to get the employer match. Be sure to fully fund your Roth options now (401k and/or IRA) while you are in the 15% tax bracket. A Roth IRA allows you to withdraw your contibutions (but not earnings) at any time without penalty or tax, so it is possible to use it as your emergency fund. But probably not for rental house capital you expect to use in a few years.

It's not a bad time to let the rest accumulate in a taxable fund until you reach the top of the 15% tax bracket. After that you will want to max out the traditional 401k and start avoiding taxes.

 

[heeyy_joe]

Be careful to not grow your real estate empire to quickly or you may grow broke. Watch cash flow carefully and you'll do fine.