Whats the wisest thing to do with $23,000?

[banned2]

I am getting a check for $23,000 next week and would like your opinion on what to do with it.
I prefer to be debt free.
I owe $39,000 for some land in the country.
I do not have any other debt.
I want to build a large pole barn on the property.
It may cost $5000.

I am thinking of paying $10,000 on my debt, spending the $5000 on the barn and leaving the rest in a checking account with automatic deductions each month to keep paying off the property.

This will lower my debt, give me cash for the barn and relieve me of the burden of writing a check every month for approximately 16 months. The 16 month period gives me time to find a buyer for another property in order to pay off all my debt.

Is there a wiser way to go?

[jIM_Ohio]

How much is the other property worth?
What is your monthly income?
What are your monthly expenses?
What are the terms of the loan for 39k (interest rate, payment and repayment period)?

I would caution putting anything to the new debt until you have the other property sold- liquidity will reduce your mid term risks of selling the property- meaning keep the 23k in a money market account- it would generate $920/year in interest and it's possible the interest alone could pay for the barn or the payment on the land itself (what are the terms of the loan?).

[Broken Arrow]

Don't forget to set some aside for taxes.

[disneysteve]

What is the rest of the picture? Do you have an emergency fund? Are you contributing to a retirement plan? How old are you? Married? Kids?

[banned2]

Any opinions?
58,
single,
retired.
kids have jobs far away,
my income exceeds my outgo
no debt (other than the $39000)
* liquidity will reduce your mid term risks of selling the property-* what the heck does THAT mean?
I'm going to get a real estate agent to list it next week for $50,000

[disneysteve]

Originally Posted by banned2

I owe $39,000 for some land in the country.

I am thinking of paying $10,000 on my debt, spending the $5000 on the barn and leaving the rest in a checking account with automatic deductions each month to keep paying off the property.

What is the interest rate on the property loan? I would assume that it is higher than any interest you could earn on the checking account. So why not just put the money toward the debt and save yourself some interest?

[jIM_Ohio]

Originally Posted by banned2

* liquidity will reduce your mid term risks of selling the property-* what the heck does THAT mean?

This means that while you own two properties, your short and mid term risks are high. You need to pay property taxes on both. You have to make payments on one or both. You need to maintain both.

These risks can be countered with liquidity- meaning put the money in the bank and spend it to meet the needs of both properties until you sell the first property.

[banned2]

I retired 5 years ago and will go live in the Arkansas mountains. If you have never been there, it may be impossible for me to describe the benefits of living in Arkansas.
Forget all the 'inbred hick' stories the media propagates.

*So why not just put the money toward the debt and save yourself some interest?*
Because if I put $23000 on a $39000 debt, I still have to make monthly payments (out of my small monthly retirement checks) and I wont have $5000 to build the barn.
The barn is absolutely required before I can begin to live there.

*This means that while you own two properties, your short and mid term risks are high. You need to pay property taxes on both. You have to make payments on one or both. You need to maintain both.*
I do not comprehend your 'risks'.
Property taxes are incredibly low in Arkansas
The other property has been paid for, for a long time.
There is zero maintenance on this patch of forest.
The only risk I am concerned with is, "Can I pay off the $39000 quickly so I can continue with my lifetime goal of living debt free?"
By paying $10,000, I lessen the chance of something preventing me from being debt free.
By putting $8000 in the automatic monthly payment, I continue to live on my usual monthly retirement check until I sell the other property which will greatly exceed the amount owed on the property with the barn.
At that point I will begin living on the barn property full time (in my travel trailer) and sell my home, giving me the cash to build my new home on the barn property.
I do have a plan.

[disneysteve]

Originally Posted by banned2

*So why not just put the money toward the debt and save yourself some interest?*
Because if I put $23000 on a $39000 debt, I still have to make monthly payments (out of my small monthly retirement checks) and I wont have $5000 to build the barn.
The barn is absolutely required before I can begin to live there.

By paying $10,000, I lessen the chance of something preventing me from being debt free.
By putting $8000 in the automatic monthly payment, I continue to live on my usual monthly retirement check until I sell the other property which will greatly exceed the amount owed on the property with the barn.
At that point I will begin living on the barn property full time (in my travel trailer) and sell my home, giving me the cash to build my new home on the barn property.
I do have a plan.

I didn't mean to put the whole 23K toward the debt. I just meant to put the 18K toward the debt rather than 10K to debt and 8K into checking. But if you don't have the cash flow to make the payments comfortably, then your plan makes perfect sense.

[maat55]

I think your plan sounds solid. Your interest rate on the remaining balance will determine how quickly and at what price you will need to drop to liquidate the property. Every months interest lowers your profit on the land, but you have time to hold out for top dollar. Good Luck.

[jIM_Ohio]

Originally Posted by banned2

*So why not just put the money toward the debt and save yourself some interest?*
Because if I put $23000 on a $39000 debt, I still have to make monthly payments (out of my small monthly retirement checks) and I wont have $5000 to build the barn.
The barn is absolutely required before I can begin to live there.

*This means that while you own two properties, your short and mid term risks are high. You need to pay property taxes on both. You have to make payments on one or both. You need to maintain both.*
I do not comprehend your 'risks'.
Property taxes are incredibly low in Arkansas
The other property has been paid for, for a long time.
There is zero maintenance on this patch of forest.
The only risk I am concerned with is, "Can I pay off the $39000 quickly so I can continue with my lifetime goal of living debt free?"
By paying $10,000, I lessen the chance of something preventing me from being debt free.
By putting $8000 in the automatic monthly payment, I continue to live on my usual monthly retirement check until I sell the other property which will greatly exceed the amount owed on the property with the barn.
At that point I will begin living on the barn property full time (in my travel trailer) and sell my home, giving me the cash to build my new home on the barn property.
I do have a plan.

You have a risk until you sell.

Maybe the 10k "down payment" keeps the payment affordable for income stream.

We don't know your budget, income or payments on new property.

What if the current property does not sell for 5 year? Keeping the whole 23k in cash, pay 5k for barn when needed, use the remaining 18k for loan payments until you have cash to pay in full.

[disneysteve]

Originally Posted by jIM_Ohio

What if the current property does not sell for 5 year? Keeping the whole 23k in cash, pay 5k for barn when needed, use the remaining 18k for loan payments until you have cash to pay in full.

This is an even better idea. Since you apparently have an issue with the payments, let this chunk of cash be your payments for as long as possible.