Renting or paying off bad debt

[Shane Webber]

Hello everyone,

New to BiggerPockets! My fiancé and I are currently struggling with a decision and after watching a BP video on YouTube where they said to use the forum figured this be the best place for some sound advice. Currently we own a home, where we have about $200,000 in equity. We were debating on selling the home to pay off our bad debt ($110,000) and purchase a new home due to us having a VA loan would benefit a lot. The other decision was to pull a HELOC and drop the monthly payment from $5,000 to $1,0088. We would then keep our home, rent it out and purchase a new home. We just don't know which the is best way to go about this. Any advice would be much appreciated and thank you for your time!

[Theresa Harris]

You don't mention what your bad debt is. If is it is something like a lot of credit card debt, then is that something that is still ongoing or was it a one time emergency expense? If it is student loans, then maybe a different story. I agree with JooYung that a HELOC may not be the best option.

Sell it and start fresh knowing what you know now.  After you pay off the debt, you may should have enough for a down payment and can start saving for a rental.  You could also look at buying a duplex or a home with a legal suite and living in one part and renting the other.