I recently came into some cash unexpectedly from selling an investment, getting insurance money back from another failed investment, and some decent online income. Now I have around $200,000, and I’m not sure what to do with it. Here are a few ideas I’m considering.
Pay Off My UK Mortgage
I could pay off my UK mortgage, which would leave me completely debt-free. However, with a low interest rate of 2.29%, it doesn’t seem very appealing. The property already generates positive cash flow, and beyond the peace of mind, there doesn’t seem to be a strong financial reason to go this route.
Buy a New Rental in the UK
I’m fond of the college town where I have another rental. Although prices are high, the demand from students keeps the rental market strong. I rent by the room and include all bills, which has worked well with minimal vacancy over the years. I found a three-bedroom flat for $225,000. I could borrow the remaining $25,000 from my mom or take a short-term loan. The property could bring in $2,000 a month in rent, yielding a 10.6% gross return before taxes and maintenance. However, it’s not in as good a neighborhood as my current property, and managing it from afar could be tricky if issues arise.
Buy a New Rental in Paris
Paris is my hometown and a city close to my heart. With $200,000, I could buy a small 250-square-foot apartment and rent it out on Airbnb for around $100 a night. Assuming $75 per night in profit and a 50% occupancy rate, I could make $1,125 net per month. Renting long-term is less lucrative and comes with more headaches, like difficult evictions.
Buy a “Viager” in Paris
This option involves buying a property from an elderly person while agreeing to pay them a monthly rent for life. I could get a bigger place with less money upfront. For example, for $130,000 and $1,500 monthly payments, I could get a 600-square-foot place. However, if the person lives a very long time, it might not be a good investment. This method also comes with strict payment terms, but it offers the chance to own a larger property without needing a mortgage.
Buy a Home in the South of France
For $200,000, I could buy a sizable property in a smaller, sunnier town in the South of France. I might get a 1,500-square-foot property, or at least 1,000 square feet in a larger city like Marseille. Renting to students during the school year could bring in $1,300 to $1,500 per month. Legal costs in France are high, though, and this could add up to $20,000 in fees.
Pour It Into My Land Development
Investing $200,000 into my land development project could speed up improvements like road paving and installing utility meters. However, this would only make sense if the development sells well. Given our current financial situation, we’re waiting to reinvest money from plot sales back into the development.
Buy a Property in Guatemala
There’s a nearby beachfront property, around 3 acres, available for $75,000. The owner, however, doesn’t have a deed and is renting from the council. Navigating this could be tricky. Alternatively, there’s a stunning stone house by Lake Atitlan for $200,000 that could serve as a rental or B&B. Guatemala City offers opportunities in the condo market but prices are rising, making it less attractive.
Invest in the Stock Market
While I don’t know much beyond index funds and Forex trading, investing in a mix of stocks could yield around 5% annually, or $10,000 a year. This passive income would be enough to cover my living expenses here if other sources dry up. However, I’ve always preferred tangible assets and worry about a potential market crash.
Do Nothing… For Now
I’m inclined to wait for a good opportunity instead of rushing into an investment. Sitting on this cash feels frustrating due to inflation, but having a sizable emergency fund isn’t the worst thing. It’s a buyer’s market if you have cash, and taking time to find the right investment might offer better returns.
Given these choices, what would you do if your only debt was a mortgage?