In the next 6 months we’ll (39M/41F) have enough post-tax money to either pay off our primary residence ( $1.5M, 1/3rd remaining, 15 years, Fixed 3.25%) or buying a property in a popular vacation location that we would use ourselves and possible rent out (but not necessarily).
* Option 1 – Pay off primary residence, which would drop monthly housing costs from ~$5,500 to ~2,000 (~7.0% average property appreciation annually)
* Option 2 – Buy vacation property (cash) which would increase monthly costs by ~$1,000, possibly ~1,500-2,000 in income (~5.0% average property appreciation annually)
* Option 3 – Invest the additional ~500,000 in existing REIT fund which has had 25-35% annual return in past couple years.
We’d like to retire in 10-15 years, and having a house in the second location we’re considering would be really ideal. Any of these options we’d be comfortable with the monthly costs. This new money won’t represent all of our savings, we’ll still have about 800k in liquid assets and 1M in illiquid assets.
I assume Option 3 probably makes the most sense from a purely financial perspective, but is there something I’m missing?