So I have a little problem. Taxes pwned me pretty hard so now I have to choose between investing my "extra" 100k or paying off my condo in Florida that I bought 3 years ago. If I do choose to invest it, what should I be looking into buying? I have talked to a few financial advisors and they have both told me that Vanguard funds are a good long term thing but in my situation, I can handle a ton of variance if it comes, so there are other/better options. Also, my monthly payment for the condo is like $700/mo, with $350 or something being intrest. Please let me know if anything is unclear. Thanks a lot.

For investing vs paying off mortgage just look at other posts in this forum (you might have to go back a couple of pages but you should find 3-4 of them). Basically it often (not always) comes down to investing gives you more +EV but mortgage gives you more peace of mind.

What has happened to the price of this thing?

You should definitely put at least some of the money towards paying off that condo because of:

And how is this calculated (what are the terms)?

what's your interest rate? is it tax deductible (i assume not since its your 2nd home)?

im guessing you're better off paying off the mortgage since you can probably get cheaper leverage other ways, but you need to provide more info.

Jon,

IMO invest the $100K in the stock market,bonds ,whatever.Paying off your property in this horrific market environment might/could result in a flat to negative return for a few years.........esp. a CONDO in Florida.There are also positive tax deductions by keeping your mortage(assuming it is not an adjustable)

If you want some other good suggestions .........shoot me a PM,as I am assuming you are in a very high tax/income bracket that screwed you the last few years from gambling winnings

GL,
Stephen

EDIT: I am assuming this is your primary home?

i think the "pay of 2nd house" part suggests it not

I was questioning from a 'tax POV' whether he claimed this property as his primary residence(as I know Jon is from Fla.) vs. his other property in Las Vegas that he lives in as well ?

He could have purchased the Fla. condo 1st and claimed that as his primary .......with LV being his 2nd purchased property afterwards

This doesn't make any sense. The market environment should be immaterial.

ya. whether the house appreciates or depreciates has nothing to do with the cash flows related to the mortgage. the "returns" on that money are irrelevant. if the house depreciates, you're still losing the same value whether you pay now or pay later. the only way it could possibly matter would be if there's a non-negligible chance that you're going to default on the house.

on the other hand, the stock market environment (or whatever the alternative investment option is) is not irrelevant. but chances are you shouldn't be trying to time that.

My point is he can make more $$$$ on his 'extra' 100K in other investment instruments/vehicles than paying off his house with those funds

I probably mis-worded my initial response.In other words his money can be put to better use/better ROI(I know what I would do) than possibly having his house/mortgage paid off.....and RE values continuing to decline in Fla. for the next few years making ZERO on that $100K

GL,
Stephen

Stephen,

Yeah, the market is variable while his RE option is static.

your post made sense until the last line. it's completely irrelevant whether the RE values go down 50% or up 200%. that's not the return on his money if he pays off the mortgage. the return on his money is whatever interest he would be paying if he decided not to pay it off.

???? Am I missing something ....or are you just being sarcastic?

You don't understand the issue fully.


He is comparing two options. Investing in the stock market where his return is uncertain, or paying off his mortgage where is cost is fixed.

Honestly, you shouldn't be giving advice on this subject until you understand what the comparison is between. It doesn't matter if the property is worth $0 or $800,000,000 tomorrow. The analysis for this remains the same.

Pete,

What I am trying to say is that IMO real estate prices/values will continue to decline for the next few years(esp. in Fla. condos).That $100K would be earning him ZERO in appreciation based on that opinion if he pays off his mortgage

If that is the case........I would rather have my $100K earning me X-amount of $$$ MORE in another asset class

Stephen

Wow.

I guess the issue is that if it was me with the 'extra' $100k.................I KNOW for a fact I would beat any RE return in Fla. investing/trading the stock market.

But I guess your right......I shouldnt be giving advice to anyone who wouldnt undestand that

Sorry

Christ. I'll make this clear. The value of the property and its ROI, whether positive or negative is immaterial. You're confused and incorrect when you bring up anything about the ROI of the property, its cost, its value, the market, etc etc etc. Those are all a completely different issue.

okay now its clear that it wasn't just a communication issue. you just don't understand how it works.

he already owns the house. his exposure (delta if you will) to the value of the house is 100%. if the house value goes up $100,000 he gains $100,000. if it goes down $100,000 he loses $100,000. this is true regardless of whether he pays off his mortgage or not.

let's say his mortgage is $100,000. and let's assume his interest payments are $7,000 per year. so if he pays off this debt, he is effectively earning a return of $7,000 per year, or 7%. note that his is money that he saves, not money that he earns - but the net is the exact same. so this is the return he has to beat for investing in the stock market to be correct (with appropriate adjustments for risk). notice that the performance of florida real estate is not a factor here.

Yes you are right............it is def. a communication issue.

LOL

Thremp

I am quite shocked at your tone/attack with regard to a subject I was using as an example(the stock market) that you actually know very LITTLE about.I usually expect this type of crap from the likes of the two bit 'stinkypetes of the world' that just broke their cherry and finally got a job.But it actually doesnt surprise me abit though as it seems you have been quite on edge the last few days with your replys/posts to other members as well

So I will use YOU as an example.You're supposed to clean-up at this time of year/this particular sport.......correct? So I guess you would rather 'waste' a 100 dimes paying off your house.........rather than using that money(making 10x that amount)over the course of a season on something you feel you have a superior edge in....right?

Sure hope it isnt because baseball season got off to chitty start?I guess I gave you much more respect than you deserve.... as I been there/done that also sir!

To clear it up, this is not my main residence and I really am not too sure how the intrest is calculated. I just know that something around $350/mo out of the $700 goes to intrest.

Stephen,

Why are you talking about the house then?


The issue is precisely 100k which will either pay off his obligation or whatever else he wants to invest it in. If the alternative investment is superior (If you were in his shoes, you'd dump it in the market. If I were in his shoes, I'd open a whole plethora of gnomes), then he should go with the alternative based on an EU/risk frontier.

Regardless, what I'm trying to communicate (unsuccessfully) is that the ROI of the home is immaterial to this analysis.

And yeah, I have been on edge. Losing annoys me.

Not sure what your interest % is, but if it's really high you may want to pay it off.

If it's a decent rate, and because this is not your primary shelter utility, I would say go ahead and leverage it and invest in other, riskier stuff.

This is all assuming you own your first home free-and-clear. If not, pay off your primary residence before anything else.

asking this question without knowing a lot of other details about your mortgage and personal finance situation would be like some guy coming up to you and saying "hey i had AK in a tourney the other day, how should I have played it?"

without knowing all of this other information for certain, i'd speculate you are better off paying the mortgage down. as long as you are a professional donkament player, your monthly (and yearly) income will vary greatly, and i wouldn't want to have two mortgages facing some extended downswing.

tc