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Hey everyone, I'm looking for your opinions on if I should start aggressively paying off the mortgage on my home-turned-rental property. We moved from Oklahoma to Alaska in October, listed the home as a rental, and are still working to find a tenant for it (slow season). I bought it in Sep 2012 for $177k, $130k mortgage, 15-yr fixed @ 2.75%. Current value is ~$190k, $95k mortgage balance (~$5k ahead of the programmed amortization). P+I $882/mo, T+I ~$290/mo, currently making $1200/mo payments (~$27/mo extra principle).
We bought another house up here in Alaska (extremely HCOLA), which sapped most of our taxable investments & unallocated cash savings, so I don't have the money on-hand to pay it off outright. However, DW & I are both active duty military officers, and have a very good income stream (~$18k/mo gross), with which we're already maxing Roth IRAs & TSPs for both of us (~$3k/mo), and have ~$2.5k/mo going to a variety of short-term savings goals (vacation, car, maintenance funds for each house, EF, and "general savings").
What remains of our allocated savings is $2,400/mo for "mid-term goals". Right now, $1200/mo to VTSAX, $400/mo to VTIAX, and $800/mo intended for buying I-Bonds (all in taxable accounts) -- basically, in alignment with my AA for that money. However, I'm considering using [some/most/all?] of this to hopefully pay off the mortgage before our assignment here in Alaska ends in Oct 2019. That would mean ~$2k/mo extra as principle payments, with the remaining $400/mo going to VTSAX/VTIAX.
The struggle I'm having is deciding if it's worth crippling our taxable investments in order to get rid of the mortgage on the rental house. In the past, I've saved up money in the taxable accounts to build up a downpayment for our next house. I like the idea of acquiring a new property in each location the military sends us, with the intention of renting them out when we move on. If we do pay off the rental, that won't be possible for our next assignment. However, the rental would be paid off and the monthly rent would be 80% profit.
A twist in all of that thinking for us is the possibility of us both leaving active duty, and transitioning to the National Guard here in Alaska after our current assignment is over, in order to stay here permanently. I could pretty easily line up a full-time Guard job up here, and my wife would likely do part-time Guard. She's pregnant with our second child, and we both want her to be able to spend most of her time at home with them. I feel like if we do THIS, it's in our best interest to pay off the rental quickly -- we'd have lower expenses for when DW went part-time, and since we wouldn't be moving again, building up taxable savings for the next house DP is basically a non-factor. The problem with that line of thinking is that I/we haven't decided if that is, in fact, what we want to do.
Any suggestions, or other recommendations? My gut says pay it off, my head says take it slow & save in taxable, and DW suggested doing a combination of both (say, $1k/mo to the mortgage, $1400/mo to investments, giving us ~$50k for the next house). I'd really appreciate your perspectives/opinions/advice. Thanks!
ETA: A few extra details... The rental house is being handled by a property management company. It increases our expenses somewhat, but greatly reduces the stress/strain of being a landlord from afar. But our intention is to hold on to the property for at least the next 5-10 years. Also, our only other debts are our current home's mortgage (another 15-yr fixed @ 2.375%, ~$325k) and a small car loan (3-yr fixed @ 1.9%).
We bought another house up here in Alaska (extremely HCOLA), which sapped most of our taxable investments & unallocated cash savings, so I don't have the money on-hand to pay it off outright. However, DW & I are both active duty military officers, and have a very good income stream (~$18k/mo gross), with which we're already maxing Roth IRAs & TSPs for both of us (~$3k/mo), and have ~$2.5k/mo going to a variety of short-term savings goals (vacation, car, maintenance funds for each house, EF, and "general savings").
What remains of our allocated savings is $2,400/mo for "mid-term goals". Right now, $1200/mo to VTSAX, $400/mo to VTIAX, and $800/mo intended for buying I-Bonds (all in taxable accounts) -- basically, in alignment with my AA for that money. However, I'm considering using [some/most/all?] of this to hopefully pay off the mortgage before our assignment here in Alaska ends in Oct 2019. That would mean ~$2k/mo extra as principle payments, with the remaining $400/mo going to VTSAX/VTIAX.
The struggle I'm having is deciding if it's worth crippling our taxable investments in order to get rid of the mortgage on the rental house. In the past, I've saved up money in the taxable accounts to build up a downpayment for our next house. I like the idea of acquiring a new property in each location the military sends us, with the intention of renting them out when we move on. If we do pay off the rental, that won't be possible for our next assignment. However, the rental would be paid off and the monthly rent would be 80% profit.
A twist in all of that thinking for us is the possibility of us both leaving active duty, and transitioning to the National Guard here in Alaska after our current assignment is over, in order to stay here permanently. I could pretty easily line up a full-time Guard job up here, and my wife would likely do part-time Guard. She's pregnant with our second child, and we both want her to be able to spend most of her time at home with them. I feel like if we do THIS, it's in our best interest to pay off the rental quickly -- we'd have lower expenses for when DW went part-time, and since we wouldn't be moving again, building up taxable savings for the next house DP is basically a non-factor. The problem with that line of thinking is that I/we haven't decided if that is, in fact, what we want to do.
Any suggestions, or other recommendations? My gut says pay it off, my head says take it slow & save in taxable, and DW suggested doing a combination of both (say, $1k/mo to the mortgage, $1400/mo to investments, giving us ~$50k for the next house). I'd really appreciate your perspectives/opinions/advice. Thanks!
ETA: A few extra details... The rental house is being handled by a property management company. It increases our expenses somewhat, but greatly reduces the stress/strain of being a landlord from afar. But our intention is to hold on to the property for at least the next 5-10 years. Also, our only other debts are our current home's mortgage (another 15-yr fixed @ 2.375%, ~$325k) and a small car loan (3-yr fixed @ 1.9%).
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