How Would You Make the Most of a $200,000 Windfall?
Recently, I sold an investment, and with another one maturing, plus some insurance money from a past investment and decent income from online gigs, I suddenly have quite a bit of cash—$200,000 to be exact. Now, I’m figuring out what to do with it. No, I’m not wasting it on booze and parties. Here are a few ideas I’m considering:
### Pay Off My UK Mortgage
Clearing my mortgage would make me completely debt-free. However, the interest rate is just 2.29%, and the property is generating positive cash flow. Other than peace of mind, I don’t see a compelling reason to pay it off right now.
### Buy a New Rental in the UK
I like the idea of buying another rental in the college town where I already have one property. Although prices are high, demand remains steady due to the student population. I rent out rooms with all bills included, and vacancies have been rare.
I found a three-bedroom flat for $225,000. I could borrow the $25,000 difference from my mom or take a consumer loan. With a 90% deposit, I could probably secure a mortgage, but the rates might be as high as my mom’s 4%. Paying off the loan within a couple of years with rental income makes more sense than getting a mortgage. The flat could rent for $2,000 a month, offering a 10.6% gross yield before taxes and maintenance. However, renting by the room in a less desirable area than my current property could mean dealing with problematic tenants, which is tricky to manage from afar.
### Buy a New Rental in Paris
Paris, my beautiful hometown, is another option. $200,000 would get me a small 250-square-foot place, which I could rent to tourists via Airbnb for $100 a night. Net profit could be around $75 a night with an estimated 50% occupancy rate, equating to about $1,125 per month. Long-term rental would bring in about $1,000 monthly but comes with risks like difficult evictions.
### Buy a “Viager” in Paris
A “viager” is a type of reverse mortgage popular in France. For example, I could buy a 600-square-foot place for $130,000 upfront and $1,500 per month until an 88-year-old lady passes away. This option lets me acquire a larger space without a mortgage, but it’s a bit morbid and risky. Missing monthly payments means losing all rights to the property.
### Buy a Home in the South of France
With $200,000, I could get a larger place in a smaller, sunnier town in the South of France—possibly around 1,000 to 1,500 square feet. Renting to students during the school year could yield $1,300 to $1,500 per month. However, legal costs in France are high, which would eat into the tax savings from reinvesting the proceeds from my sold Parisian rental.
### Invest in My Land Development
The $200,000 could significantly improve my land development project. We could pave roads and install utilities. But investing blindly in infrastructure might be wasteful if someone buys multiple plots to build one house. Considering my partner’s current financial situation, we agreed to reinvest profits from land sales into further developments.
### Buy a Property in Guatemala
I am also looking at a local beachfront property for $75,000, but it lacks a deed, which involves legal headaches. Alternatively, a $200,000 stone house on Lake Atitlan looks promising for tourism. Running a small B&B could be an option, but appreciation might be slower.
### Invest in the Stock Market
I’m not an expert in the stock market beyond index funds and Forex trading. A mixed portfolio could yield a 5% annual return, around $10,000 per year. This passive income could cover my living expenses, but I prefer tangible assets. The stock market’s volatility makes me nervous.
### Do Nothing for Now
I got most of this money recently and hate seeing it erode due to inflation. I’m forcing myself to be patient and not rush into anything. The current buyer’s market may present better opportunities if I wait.
Knowing what you know about my situation, what would you do with $200,000 if your only debt was a mortgage?