So I'm planning on changing up the status quo come January 1st. Let me know if I have any glaring oversights.
Phase 1: January 2025 - March 2025
We have been paying an extra $525/month toward mortgage principal for years (rate is 2.875%). We stop this on January 1st. We have also been putting $250/month toward my dream car (DeLorean). There's currently $37,000 set aside for it, which isn't enough. Starting in January, by which time the DeLorean account should be at $38,000, instead of putting money toward the mortgage principal, the money is diverted to the DeLorean account, which now grows by $750/month instead of $250. So, by March 2025, the DeLorean account reaches $40,000. In March, I get my annual bonus, which should be an after tax amount of between $5,000 to $7,000. Possibly slightly higher, but definitely not sub-$5k. This goes to the DeLorean account, which now sits in the mid-40s and is finally enough for the car (hopefully).
Phase 2: March 2025 - March 2027
From March 2025 onward, there is no more need to put aside money for a DeLorean, as one would already have been purchased. This frees up the $750/month that was going that direction. It should be noted that car insurance will increase, though, as I've been simply paying liability-only on my 2004 Dodge Stratus. I'll need comp, coll, uninsured, and underinsured coverage on the DeLorean. Not sure what that'll run me, but let's hope I still have $600/month. As for my current car, I "sell" it to my car-less brother for $1. He uses it for two years and (hopefully) sells it back to me for a dollar.
That $600/month now goes into a house down payment fund. We don't have such an account presently, so that'd be starting at $0. Anyway, over the two years that I intend to own the DeLorean, $600/month goes into that account, taking it to $14,400. My annual bonuses from March 2026 and March 2027 also go into this account, which should bring it up $25,000 - perhaps a smidge more. At this point, I sell the DeLorean. It's a classic car, so it doesn't depreciate like a typical car, but I'd be using it as a daily driver, so it also wouldn't appreciate like a typical DeLorean. Hypothetically, I sell it for the same price as I bought it for, call it $45,000. That goes into the house down payment account, bringing it to $70,000.
Phase 3: March 2027 onward
I buy my old car back from my brother, unless it's broken, then I have to find something else on Craigslist. We take the $70,000 house down payment fund and buy a new (to us) house. All the bells and whistles this time: air conditioning, two bathrooms, and a garage. Hard to predict house values and mortgage rates this far out, though. Fingers crossed that such a house can be found for sub-$500,000 and rates are under 6%. Let's call the monthly payment in the low $3,000s, which sounds completely awful (our current payment is $780).
At this same, we recast our current mortgage, since we've paid so much extra principal over the years. This reduces our monthly PITI from $780 to $680 or so (and puts the mortgage end date back to 2051). We move from the old house to the new house and we rent out the old house. I'm not super familiar with current rental rates, but I would hazard a guess that we could rent a 3-bedroom, 1-bathroom, 1300 square foot house for $1,500 - $1,800 per month. Whatever our profit ends up being (after taxes), that goes to paying the mortgage on our new house. That takes the (possibly) $3,200 monthly payment on the new house down to perhaps $2,300. We had been paying $780 + an extra $525, for a total of $1,300, which means we'd still be short by $1,000/month. Fortunately, by 2027, our three-year-old will be five and will have started school. That means that my wife will be available to work a part-time job during the school day. This hopefully makes up the difference.
Obviously we wouldn't make moves without knowing the data for the next step beforehand. For example, knowing the going rental rate for houses like ours and knowing how much my wife will be making in a part-time job.
Other relevant figures: I earn $89,000/year. 18% of my gross goes into my 401k and my company matches 6% dollar-for-dollar, with no vesting period. We also put $580/month into a Traditional IRA in my name and $580/month into a Roth IRA in my wife's name. We also put $150/month into an HSA.
I'm guessing most of the pitfalls will be "what if you can't find a renter" and other things around renting out a property. Those are at least the known unknowns. But are there any unknown unknowns sneaking around?
Phase 1: January 2025 - March 2025
We have been paying an extra $525/month toward mortgage principal for years (rate is 2.875%). We stop this on January 1st. We have also been putting $250/month toward my dream car (DeLorean). There's currently $37,000 set aside for it, which isn't enough. Starting in January, by which time the DeLorean account should be at $38,000, instead of putting money toward the mortgage principal, the money is diverted to the DeLorean account, which now grows by $750/month instead of $250. So, by March 2025, the DeLorean account reaches $40,000. In March, I get my annual bonus, which should be an after tax amount of between $5,000 to $7,000. Possibly slightly higher, but definitely not sub-$5k. This goes to the DeLorean account, which now sits in the mid-40s and is finally enough for the car (hopefully).
Phase 2: March 2025 - March 2027
From March 2025 onward, there is no more need to put aside money for a DeLorean, as one would already have been purchased. This frees up the $750/month that was going that direction. It should be noted that car insurance will increase, though, as I've been simply paying liability-only on my 2004 Dodge Stratus. I'll need comp, coll, uninsured, and underinsured coverage on the DeLorean. Not sure what that'll run me, but let's hope I still have $600/month. As for my current car, I "sell" it to my car-less brother for $1. He uses it for two years and (hopefully) sells it back to me for a dollar.
That $600/month now goes into a house down payment fund. We don't have such an account presently, so that'd be starting at $0. Anyway, over the two years that I intend to own the DeLorean, $600/month goes into that account, taking it to $14,400. My annual bonuses from March 2026 and March 2027 also go into this account, which should bring it up $25,000 - perhaps a smidge more. At this point, I sell the DeLorean. It's a classic car, so it doesn't depreciate like a typical car, but I'd be using it as a daily driver, so it also wouldn't appreciate like a typical DeLorean. Hypothetically, I sell it for the same price as I bought it for, call it $45,000. That goes into the house down payment account, bringing it to $70,000.
Phase 3: March 2027 onward
I buy my old car back from my brother, unless it's broken, then I have to find something else on Craigslist. We take the $70,000 house down payment fund and buy a new (to us) house. All the bells and whistles this time: air conditioning, two bathrooms, and a garage. Hard to predict house values and mortgage rates this far out, though. Fingers crossed that such a house can be found for sub-$500,000 and rates are under 6%. Let's call the monthly payment in the low $3,000s, which sounds completely awful (our current payment is $780).
At this same, we recast our current mortgage, since we've paid so much extra principal over the years. This reduces our monthly PITI from $780 to $680 or so (and puts the mortgage end date back to 2051). We move from the old house to the new house and we rent out the old house. I'm not super familiar with current rental rates, but I would hazard a guess that we could rent a 3-bedroom, 1-bathroom, 1300 square foot house for $1,500 - $1,800 per month. Whatever our profit ends up being (after taxes), that goes to paying the mortgage on our new house. That takes the (possibly) $3,200 monthly payment on the new house down to perhaps $2,300. We had been paying $780 + an extra $525, for a total of $1,300, which means we'd still be short by $1,000/month. Fortunately, by 2027, our three-year-old will be five and will have started school. That means that my wife will be available to work a part-time job during the school day. This hopefully makes up the difference.
Obviously we wouldn't make moves without knowing the data for the next step beforehand. For example, knowing the going rental rate for houses like ours and knowing how much my wife will be making in a part-time job.
Other relevant figures: I earn $89,000/year. 18% of my gross goes into my 401k and my company matches 6% dollar-for-dollar, with no vesting period. We also put $580/month into a Traditional IRA in my name and $580/month into a Roth IRA in my wife's name. We also put $150/month into an HSA.
I'm guessing most of the pitfalls will be "what if you can't find a renter" and other things around renting out a property. Those are at least the known unknowns. But are there any unknown unknowns sneaking around?
Statistics: Posted by LiterallyIronic — Tue Sep 17, 2024 11:26 am — Replies 7 — Views 387