Best path to build wealth?

[dwmuhammad]

Wife and I are not sure on what is the best path to take. We have a Rental property in the Midwest worth $165k~ & owe $133k at 2.75% interest rate that was bought in 2021 with our VA loan with the mortgage being $788 and was rented for 1 year at $1,500 minus 10% PM fee =$560~ mo cashflow before 20% vaca + repairs. My commute is 1 h 15m per way 3x week, but get mileage reimbursement (But come out ahead). Expenses here: $2,100 mo

We have our main house that was built in 2022 about 40 min from my work as I’m hybrid and wife is remote and is in a better location (closer to jobs & more things to do) but with a interest rate of 5.625% with the mortgage being $1976 mo, and the house is worth ~285k for which we owe 287k, so negative equity if we were to sell. Expenses here: $3,550 mo

We want to leave the Midwest within 5 years, with the most amount of wealth possible, preferably with lower stress.

Should we:

A. Sell our main house at a loss for $10-20k and move back into our rental property bc it’s stupid cheap and save for 5 years?

B. Keep renting it out for the cashflow to help offset our main mortgage? Have 30-35k equity in rental.

C. Sell the rental, make $20k+ & put into VTI?

D. Pay off low interest rental property sooner & cash flow $1140 mo?

HHI: 122k for my wife and I, w/o second job, or $150k with second job if we stay at our main house that I will start next week, since both of our jobs are very low stress & feel semi-retired. We are in our mid-late 20s, with bachelor degrees, if that helps.

We max out Roth IRAs, both get employer 401k matches & i am In the reserves (Healthcare & pension).

 

[labonall]

@dwmuhammad I would keep the rental that at the very least pays for itself, live in your house that gives you better quality of life and make an effort to prepay what you can on 5.625% loan to build up some equity by the time you decide to move

 

[dwmuhammad]

@labonall Would you pay more off on the house over putting more into retirement accounts? we currently contribute 15%/yr

 

[labonall]

@dwmuhammad how much do you have saved across 401k pre tax / Roth after tax / taxable? how significant and reliable is your pension? is it 15% including or not including employer's match?

 

[dwmuhammad]

@labonall I have 20k across my 401k & Roth & my wife has about $10k. We just started them 1.5 years ago with our first professional jobs leaving Active duty & both get matches & started funding max for our ROTH’s. The pension will start when I’m 59.5 since I’m in the reserves now for 14 more years

 

[labonall]

@dwmuhammad I would aim to have 1x your income by the time you are 30, so that might require ramping it up a bit for the next 3-4 years to perhaps $25k-$30k per year. You said you are already maxing out Roth IRA, so might want to throw a bit towards 401k as well

the rest goes to the mortgage, but your rate is not that high where you need to panic and sell a kidney to pay it off - just a bit extra especially in those early years, when most of your regular payment is interest, goes a long way