By Ashley
We are about to get the inheritance soon. This is one of the happy cases where no one died (which is, I believe, the most common reason for inheritance?). Instead, a relative liquidated some of their assets and decided to pass some of it on to us now, while they are alive, rather than waiting until they die.
It’s a good amount of money, but it’s still in the 5-figure area (just to give a rough estimate of the amount). At some point in our younger lives, we may have felt that this money had changed our lives. Heck – I remember receiving an inheritance from my grandfather for $10,000 when I was 22, and it definitely felt like a life-changing amount of money! This inheritance is much higher.
Our current financial situation
However, at this point in our lives, we don’t really need money per se. We make enough to cover all our bills. The only debts we have are my student loans (scheduled for forgiveness in October 2026), and our mortgage (at a very low interest rate of 2.625%). We both have health retirement accounts, we have maxed out our health savings account, I have a 529 health account for the kids, and we also have a mix of financial investments in stocks, bonds, mutual funds, and CDs (outside of retirement accounts).
Investment ideas
Since we don’t need money to help pay the bills, my opinion is that we should invest it and let it grow. For me, the next obvious place to invest is in real estate. I’ve blogged before about my budding interest/desire to invest in real estate. To me, this is the next obvious place to invest to help diversify our portfolio. The amount we inherit – not enough to buy a house, but certainly enough for a down payment large enough to avoid PMI (for a modestly priced home) and likely some leftover repairs. It’s kind of like a rental home “emergency fund” separate from our regular emergency fund.
I’m very conservative financially, but my husband is better than me. I know he would rather put the money toward paying off our mortgage on our current home. He has a goal to own our home outright before he retires in 7 years. And while I’d love that as a goal, I pulled out the calculators and ran the numbers to show how much we could gain from another investment versus paying off our house early. And while we won’t be doing our real estate search at this moment… I think he’s come on board with caution.
Short-term rentals versus long-term rentals
This leads me to the next puzzle. If we actually go the real estate route – what kind of rent should we get? Selfishly, I like the idea of buying a house somewhere a few hours away that doubles as an AirB&B vacation rental. This way, we can use it and enjoy it as a family, and we will also generate income from short-term renters. Pros of this approach: Our family will enjoy it and take vacations on the cheap; You can also make more money from short-term rentals. Cons of this approach: income is inconsistent, there is a lot of hassle associated with oversight, management, cleaning between guests, etc.
The other alternative is to buy a house in the city somewhere and try to rent it with a one-year (or longer) rental option. Pros of this approach: It’s much less hassle, and there’s less cleaning/maintenance. Income is more consistent from month to month. Cons: It will likely be less money than a short-term vacation rental, and we won’t be able to enjoy it as a family.
Decision making
While I’m leaning toward the short-term rental option so our family can enjoy it, I’m also split because I like the idea of less supervision and constant maintenance. Also, I have no idea how to run an Air B&B so I know it will be a lot of work to run.
If anyone has short term and long term rentals, do you have any thoughts or opinions to share? I’m curious to hear from people who have done both. Other factors that may influence your decision – If we go this route, we plan to have a rental-only EF, with enough money to cover a potential “larger” repair (like a new HVAC system or new roof). Also, with our current income, we could pay the mortgage on both houses if we needed to. It would make things tight in the house and is not ideal, but it can be done if necessary (this is more in the short term than long term/ongoing).
For now, it remains as is
Just as I’m in no rush to buy a new car (see my last post), we’re also in no rush to buy a house. Especially with interest rates so high right now, it might be wise to wait a bit and see if things turn out for the better. In the meantime, the money will be safe and sound in the money market mutual fund. But I like to think and plan for the future and diversification seems to be a wise financial decision.
Hi, I’m Ashley! Arizona on paper, Texas in heart. Lover of running, blogging and all things cheesy. Newly 40 years old, married and mother of two children, working in the academic field. Trying to finally (finally!) pay off that ridiculous 6-figure student loan debt!
