Hey there,
I'm a big fan of financial independence and through the death of a family member am coming upon a windfall of approximately 430k. This family member told me the house we purchased would be our forever home, but I was manipulated and now need to sell - which will leave me temporarily homeless with cash in an HCOL area - Central Coastal California. 31 Single with a dog, been in the workforce for 6 years. I have good business skills and clients have told me any FANG company would be lucky to have me but I love being self-employed and love my own time.
I am a sole proprietor of a business with a high hourly rate - it runs like a consulting business, although with all the emotional, financial, and psychological turmoil I have limited operations. The thought of bringing on one more client at the moment seems awful. In typical small business owner fashion, it looks like I don't make that much money on paper - which may hinder my ability to get a mortgage.
I'm used to ramping up my earning potential within months and decreasing when I want. I've been an entrepreneur since graduating college 7 years ago and have somehow made it work all this time. I can net the equivalent of a 20k salary or 200k+ salary when I choose. 200k to work ~25 hours a week. Currently, I am burnt out dealing with the estate and grief. I'm breaking even with my expenses and barely working while closing the estate. I usually have a saving rate of greater than 50%. This business is my passion, but it's also challenging with its instability and client interaction. I am a heavy introvert. This business is geography dependent and I really enjoy where I live and worked hard to beat homelessness and have a house.
In the search for "passive" cash flow and investing for my future, I have a rental. Paid off the mortgage, 150k in equity that grosses about 1000k/month not leaving out insurance/taxes. It runs autonomously and vacancy rates are very low. Pre-pandemic it was renting at almost 2k a month for a 30% COC return, but I don't think those rents are in the cards anytime soon. It's appreciated 10% in 3.5 years, if it was cash on cash it'd be substantially more.
I hate trading my time for money and have spent my younger years trying to enjoy my hobbies while I still can. So two tenants of my life are (relatively) "passive income" and high hourly rates. Now that I have more stability, I'd like my investments to reflect that. I'm losing the energy to "hustle".
I have ~40k liquid cash or the equivalent of an 18-month emergency fund, being self-employed I like cash to smooth the seas.
I have an 820 credit score.
Paid off a commercial vehicle that I will camp in temporarily, worth around 30k. Can renovate it and add value.
And probably 30k of goods that I could liquidate.
HOUSING
Rent for a crappy studio apartment is around 2k/month+ - increasing monthly
Rent for a 2/1 house is $2600+ - 6 years ago it was ~$1300
400 sqft Single family is going for ~500k, but would more realistically sell for less. The average sq ft price in the area is $616/sqft.
Buying a 2/1 1000sqft house is around 650k+, more in nicer neighborhoods. I don't want roommates.
Interest rates are at 7% - making what I can afford substantially less. 100k mortgage at 6.5% is around $500/month.
When you don't get your foot in the door on the Bay Area RE market, it runs away from you....quickly. I made 300k on my primary in 3 years. It is a high-stakes, high-cost stressful gamble.
Ideal
I want low and stable recurring overhead, to make being an entrepreneur more sustainable and less stressful. I think I'd like to buy a place for all cash if possible, (mind you property taxes and insurance on a 500k house are going to be $500/month add in repairs, etc.), and then get my business going again once I recover.
Contingencies
A) Should I use this windfall and move to LCOL and buy outright and invest the rest into an index fund? Leaving everything behind - friends, business, network, etc. The old go-back-to-nature trope.
B) Should I put multiple downpayments on different properties and landlord? Seems stressful, overleveraged, and higher risk than I would like going into my 30's.
C) I realize I could also sustain a small nomadic lifestyle with the rents from two rentals and could probably net out 2500/month and live somewhere else cheaply if buying outright in my current location.
Thanks for listening, appreciate any input