A friend whom I've known for about 8 years recently asked me for advice and I wasn't sure how to respond. I became curious and decided to see if others could weigh in.
Background: He and his wife share 3 mortgages. M1 has about $40K left, and the property is used to house a relative, rent-free (they are OK with this). M2 has about $350K left, and the property is rented out with rental income matching the mortgage. M3 is for about $260K, for a recently purchased primary residence.
Both have jobs, which, after the montly M1+M3 payments, provide a combined total disposable income of about $2500. They have mostly typical middle-class expenses: car and college loan payments ("a few hundred a month"), utilities, cell phones, typical household maintenance. As far as I know they participate in employer retirement plans. He said they also have about $10K set aside for 'rainy day.'
His basic strategy is to build wealth by gradually acquiring real estate.
However, he is concerned about taking on too much debt, and unsure of how to continue with investing in RE while controlling the risk of overexposure to debt.
Is the mortgage debt too high? The rental property is in a hot RE market, so could be easily sold with significant equity. However, they would prefer to keep it.
Can they afford another mortgage, and in what amount? (e.g. they are considering $50K for a small cabin, which could be rented out).
How much cash should they ideally try to put aside per month? (provide a target and justify)
Other than setting cash aside, what would be some good uses of funds to make sure the money would appreciate and outpace inflation and add a nice bonus to retirement?
They are currently in mid-30's. If there is ONE key strategy or decision they could make today that would help them retire "early" (say, mid-50's), what should it be?
Personal advice, as well as any resources for reading/self-education would be appreciated. Thank you.