Starting Out - First Steps to Convert SFH Primary into Rental

[Jon Demma]

Hello, 

New investor, still learning. Quick background -- own a small business(10 years) in MN that has $0 debt. 

Would like to start our REI journey by converting our primary single family home into a rental. Purchased in 2017 for $305K, refi in 2020 for $236K at 3.25%, current value = $450K.

I know this is a very general question but I need some direction... Can someone point me in the right direction for the next steps to take? Anything to be on the look out for(good and bad)? 

I will gladly give back once I have some experience under my belt. Thank you very much in advance for any help!!! 

[Jessica Angulo]

Quote from @Jon Demma:

Hello, 

New investor, still learning. Quick background -- own a small business(10 years) in MN that has $0 debt. 

Would like to start our REI journey by converting our primary single family home into a rental. Purchased in 2017 for $305K, refi in 2020 for $236K at 3.25%, current value = $450K.

I know this is a very general question but I need some direction... Can someone point me in the right direction for the next steps to take? Anything to be on the look out for(good and bad)? 

I will gladly give back once I have some experience under my belt. Thank you very much in advance for any help!!! 

 A couple of things to consider here:

1. Do you have funds for your next primary purchase or are you needing to tap into the equity to get closing costs and down payment?

2. You can access equity of current primary by a Home Equity Line of Credit (HELOC) or refinance. HELOCs have higher interest rate but much lower/to nearly no closing costs, refinancing has much higher closing costs but lower interest rate. Analyzing both numbers: new total payment and costs.
Also, look at how much your current primary could rent for, and ensure the rent will cover your new monthly payment. 
3. Purchase a new primary with as little as 3% down, depending on your available capital for down payment. Your current mortgage payment will not affect DTI as long as you have a future tenant lined up prior to closing on your new primary.