Some background:
So my dw's parents are aging. They were working class during their working years, but through some really, really intelligent real estate investments, and a market that luckily just incredibly went up, up, up, they built a good pad of assets. They are trying to sell some properties and distribute some or all of their money before they die among their seven kids, for several reasons, probably one of which is that we won't get an estate tax. So recently they unexpectedly sent us a $10,000 check, and they said they hope to send us another sometime within the next year. We are truly grateful for this huge gift, whether or not there is more to come. We have been so blessed.
But we have never had this kind of money before and aren't sure what to do with $10,000. We had a few things we've considered:
What would you do with this $10,000 if you were me?
And if you have any experience with adding onto your home in the form of bedrooms and possibly a bathroom, will you also advise me in that subject?
Thanks for getting through this long post, and for any advice you can give me.
- dw and I both have fairly low-paying careers we love. I am in ministry and my dw is a preschool teacher. Combined our gross income is about $55,000. Our combined take home pay is probably around $34,000-$35,000 (??), after taxes and insurance. We somehow get by, but when we do our budget on paper, it always comes out being $200 or $300 short each month if we were to attend to everything that really needed attending to. In a few years, if we both continue working, our gross income will probably be just shy of $60,000 due to raises and an increase in my hours planned for next year.
- dw has great benefits through her work-- as her preschool is a state run preschool, and she is in the union-- giving both of us very comprehensive medical care (important because of my type I diabetes) and dental care. My work also pays some contribution into my medical care costs, though not as comprehensive or as much as my wife's work.
- We currently have one child in our home, with another foster-adoptive child possibly on the way in June. We get reimbursed for most of dfs's care, but hopefully in a few months will be finalizing his adoption. This means we won't be receiving any reimbursements.
- We own our home. It is small and not particularly attractive. It's a two-bedroom, 1.25 (the .25 being in the heated laundry room that is in the garage) bathroom ranch style. It was built in the early 60s and badly needs updates including double-pane windows as well as a new roof and some tender-loving care and at least one major repair (a new wall on one side of the bathroom and repaired plumbing). We purchased it for about $125,000 three years ago, and its value has appreciated to closer to $200,000. We refinanced a couple years ago, bringing our payments down from over $1000/month to less than $930. Then repair needs started coming up every which way so a few months ago we got a home equity line of credit of $50,700, with the intention of spending no more than about $10,000. But we've been scared to use it because of whether or not we can afford the payments and because we hate the idea of a variable interest rate (though we can fix some payments at a slightly higher rate, up to 6 times per year, for a small fee). So things are getting really neglected here.
- We are also outgrowing our home. It is quite small and we feel like we can't keep up with maintaining ourselves in such a small space. Not to mention that more space will be required for future adoptions, so if we want to have any chance of continuing to expand our family, we need at least another bedroom.
- We own one car that we bought a couple years ago, a 1993 Toyota sedan with no power windows or locks or anything like that. We purchased most of it out of pocket from some insurance money I got after an accident when my car was totaled. But we did take out a small personal loan of maybe $1500, and we're still working on paying the last of that off with $50/month. It is very cramped in the back seat, where my dw sits to keep dfs (who hates the car) from screaming his head off. I don't think she can keep sitting back there when we add a second kid in a second car seat. Plus, we want to keep growing our family. I desperately want a van. Also, we really ought to have a second car because we are putting double the mileage on our car because I am always driving dw around. And the mileage on our 1993 is really getting up there, so having a backup for when it starts having trouble will be important as well.
- We have no other loans or debts that I can think of. We did borrow $5000 from my in-laws to pay for infertility treatments, which did not result in pregnancy, but they are taking this off our inheritance and say we shouldn't worry about paying them back. We also borrowed some money, maybe around $1000 from my BIL when we bought our house, but I think he told us not to worry about paying him back.
- We are semi-frugal. We don't have cable tv, or anything like that. I bought dw a prepaid cell phone for the holidays, which we were really needing due to some circumstances, but I bought her a years worth of minutes so it won't be another monthly expense. We don't have a bunch of magazine subscriptions, etc. We do shop as much as possible for organic, which can up the costs, and we also aren't always frugal when shopping for household items. Still, these are a relatively small percentage of our budget anyway.
- We have two cats and two dogs which can be a little costly, but we see them as members of the family. dw says when they die off, no more, but they're not *that* old yet.
- We dream of eventually having four children. In an ideal world, dw would be a SAHM, as that is what would truly make her happiest. For a while, we had it budgeted and figured out so that she could do this in another few years, but the cost of living has been increasing enough, and the costs of having more kids will only make things more expensive, so it doesn't look like that will pan out. This is truly one of our greatest sorrows at this point in our lives. For now, I take dfs to work with me, but I am frustrated trying to do both, and will likely soon hire a mother's helper for some of the time I am working. It would be cheaper to put him in a child care center, even full-time to cover all my working hours, but there are a number of reasons this won't work out for his situation.
So my dw's parents are aging. They were working class during their working years, but through some really, really intelligent real estate investments, and a market that luckily just incredibly went up, up, up, they built a good pad of assets. They are trying to sell some properties and distribute some or all of their money before they die among their seven kids, for several reasons, probably one of which is that we won't get an estate tax. So recently they unexpectedly sent us a $10,000 check, and they said they hope to send us another sometime within the next year. We are truly grateful for this huge gift, whether or not there is more to come. We have been so blessed.
But we have never had this kind of money before and aren't sure what to do with $10,000. We had a few things we've considered:
- We toyed with the idea of finally getting a van, nothing brand new or even close to it, but maybe something around $5,000-7,000. We thought this would save us from debt with a high interest rate, and everyone we told about the money had been telling us to pay off any of our debts with high interest rates (which we don't really have). But we doubted whether this would be wise, as it wouldn't be an investment at all. Cars only depreciate in value. So we aren't sure what we'll do about needing a van (a loan??), but for now we've basically ruled out getting one with this money.
- We've thought about investing it in something low-moderate risk, somewhere between a CD and mutual funds. We know nothing about investing, but figure we could do this for a long or short period for different returns, depending on what else we might want to do with the money.
- If we invested or saved it and then were able to net a little more, some things we've considered using the money for include: adoptions and /or more infertility treatment stuff (although infertility stuff has no guaranteed return of any benefit), investing in furthering my education (something that probably won't up my income any but that I really dream of doing so I can have some more flexibility about the type of ministry I do), or using the money as part of retirement investments, or investments for the college education of our kidos. We have no idea how to prioritize these things, as they are all quite important to us.
- We also considered using this money to get dw started SAH, or investing it in at at-home business that she could start, but she doesn't have any ideas of something she'd like to do as an at-home business, and the money wouldn't even cover the insurance we'd lose for more than half the year.
- Another thing we have been considering is the needs our home has now, and it seems like it might be wise to use some or all of this money for home improvement, as this would invest in our investment here.
However, my BIL who is a really successful real estate agent and who also invests in rental properties himself (which is how my PIL got this money in the first place), suggested we also consider buying another property and renting one out, perhaps using some or all of the money for a downpayment or some or all of the money for home improvements. He was hoping we'd be able to find something bigger for ourselves and rent out our current house, as the rental payments would cover our mortgage here plus a little extra to help with upkeep. This was a really attractive option for dw, who wants to follow in the footsteps of her parents. She also told her parents about the plan before we had researched it, and they were nothing short of thrilled.
But, our problem is that prices have just gone up, up, up here, and even though we qualify for a mortgage with a payment of $1600 something per month, we would be in really bad shape if we increased our payment more than a couple hundred.
Even if we bought something the same size as what we have, and rented the new place out (or vice versa if we liked the new place better), we'd be paying about $500-600 a month out of pocket because places are that much more expensive. Obviously this would be a long term investment and eventually we would hopefully get in rent what we would have to pay out of pocket now, but until then, we'd be paying it out of pocket without having any more space than what we have now.
We considered doing it anyway, and using the $10,000 to pay for the difference between what we can get in rental and the mortgage, which would last 20 months, and then the next $10,000 for the same thing, giving us 40 months or almost 3.5 years before we'd have to worry. But then if rentals aren't going for that much more, we'd have a problem unless our income was significantly more or unless we could sell one of the houses for a profit that would cover the inheritance plus what we already are counting on in equity. So even though this was our preferred option, it looks like we might have to throw it out. However, we might still consider it and wait a while and just see if a good deal might come our way. BIL could keep an eye out for us. - Another thought we've had is just focusing on home improvements here, and possibly adding a bedroom (or two if possible, with or without a bathroom). But how much does it cost per square foot to add another level to a home, assuming the foundation can support it, as I am not sure how much room we would have to build out (or would want to build out)? Would we have to take out a loan in addition to using the $10,000 we have now and the $10,000 that is coming later? And would adding on a bedroom or two increase the value of our house enough to boost our equity even after cost of building it is taken into account? Is it an investment, or do we lose money?
What would you do with this $10,000 if you were me?
And if you have any experience with adding onto your home in the form of bedrooms and possibly a bathroom, will you also advise me in that subject?
Thanks for getting through this long post, and for any advice you can give me.
. I have thought of adding on and if it ever came down to it, it would probably be better for me to find a place that meets my needs, rather then add on)
On the real estate, this is what I would invest it in if the following conditions are things that you want and are capable of: small repairs for the rental (leaky faucets, hot water heater troubles, ect.), it is alto of work to get the rental cleaned out and ready for a new tenant (it would usually take my family about a week of constant painting, cleaning carpets, ect.), it would only pay off if you are considering it for a long term thing, sometimes tennants are very late for their rent. I'd keep some $$ just for this purpose. If you do not feel up to the task of having tennants, then I would consider upgrading to another house, spend plenty of time finding exactly what you want, and then put all of the $$ down on it. Sell your house after you find the house that you would like to live in the next 10+ years (with plenty of room for a growing family).
) so perhaps that's not an issue for you.
: My parents have remodeled several, and added onto a few, and the additions just always have problems, usually leaking, or you have to re-paint the outside to match, or re-roof. They usually go over-budget b/c there *will* be unforseen things that need repairing while you are ripping out a wall or whatever. I also don't like the way they look, most times you can tell that an add-on was added on, and I just personally don't like that look.
