$170k Inheritance - Loans vs. Investing?

[NeedMoneyAdvice]

Hi all,

My grandmother passed away a few years ago and left her single family home to me. There is no mortgage. We used it as rental property for the past year, but now have a buyer. The selling price is $170,000 with no realtor involved.

My financial breakdown:
$18,000 in subsidized student loan debt (5% interest rate). Graduating from Grad School this May
Making $34,000/year with no benefits or retirement

Fiance's financial breakdown:
$25,000 in unsubsidized (7% interest rate) student loan debt.
Making $40,000/year with benefits and pension

Neither of us have an auto loan or credit card debt. We are also getting married this summer, and expect the wedding to cost around $5,000. We are currently renting, with the goal of buying a duplex this summer (170k-225k).

Another problem is that I have been in school the past 7 years and have a poor work history. We are waiting on hearing back from a mortgage lender, but they are hesitant to give us the loan because of this. They also won't consider income from the other half of the duplex, because we haven't owned rental property for at least 2 years.

So- we have $175,000 in cash, and owe $43,000 in student loans. My initial thought is to pay the student loans in cash, and put $100k down for the duplex. This would leave us with about $25,000 in cash to pay for the wedding and maybe travel a bit.

Any thoughts or advice? I'm only 27 and consider this possibly the biggest financial decision of my life. I am worried that I'll make the wrong decision.

Cheers

[97guns]

my opinion is to use all the equity and buy another property, the money you do not pay for rent can be used to pay down loans. im sure your grandmother left you the place so you have something to live in and not to have to ever worry about a home. let her legacy live on, im also sure that she worked very hard to obtain that property and to see her hard work go in vain to only memories is beyond my thinking, i like to honor that person with the same thought process he or she had. the worst thing in my opinion that you can do with any of the funds is spend frivolously

i see it too often where someone gets an inheritance and blows it just because they dont know what its like to have this kind of money, they have no respect for it. not saying your there, just viewing my thoughts

[Goldy]

I think you have a solid plan. If it were me I would pay off the student loans, put the majority of the rest to the duplex, and pay for the wedding. Same as you.

I like the idea of taking some to travel, not too much, maybe 5k. If I pass money on I would want my heirs to enjoy some of it by making life experiences with it, not just put it in an investment account or equity. Its a great way to remember that person.

[rennigade]

Why not just move into the house? You'll own it free and clear. Then you can start knocking down the debt and pay for your wedding.

[autoxer]

the worst thing in my opinion that you can do with any of the funds is spend frivolously

I agree.

This would leave us with about $25,000 in cash to pay for the wedding and maybe travel a bit.

$25k is a lot to pay for a $5k wedding and maybe travel a bit. Just be careful, if you leave that money sitting in your checking account, then it will be very tempting to inflate your spending. If you tie it up somewhere else (home equity, CD's, brokerage account, wherever...) then it won't be as accessible, so you won't be as tempted by it. It's fine to keep some around as an emergency fund, just don't confuse that with the money available for spending.

[HappySaver]

In your particular situation (concerns about getting a mortgage) I'm 100% with 97guns. Use the money to purchase your own home outright if possible, or as close to it as you can get. It's the best wedding present you can possibly give yourselves. Use the money that would have been put towards the mortgage to pay off the student loans as quickly as possible, and you can travel after that.

Will you be purchasing the home before or after the wedding? Can you put the house deed in your name only, since it's your inheritance? If you plan on putting both names on the deed, you should wait to purchase until after you are married. A pre-nup would be in order as well. The moment you put both names on the deed, half the money has gone to your fiance/husband.

[JoeP]

If I found myself in a similar situation, I would:
1. Pay off student loans right now. 175-43=132k
2. Set aside $5k for the wedding, and keep to that budget no matter what. 132-5=127k
3. Buy a single family home for around $100k, using cash only. 127-100=27k
4. Put aside the maximum 5500 toward each of the Roths. 27-11=16k
5. Set aside $10k for the next car, which will be used and paid for with cash. 16-10=6k

The remainder can be used to partially furnish your new home, or some travel.

Going forward, you will be rent-free and mortgage-free, which puts you into an envieable position. Your expenses should be very low compared with most others, so you can save more easily, and reach saving goals more quickly. I'd suggest setting up direct deposit so that your payroll goes directly into separate bank accounts: one for your next car, one for your Roth IRA, one for trips/projects. You can also max out your pre-tax retirement deductions, if applicable.