Sell SFH to purchase new primary residence and income property
Hi All,
I'm looking for a little feedback on a plan my wife and I have been mulling over. My wife and I purchased our current SFH in 2013, this was before i knew about bigger pockets or house-hacking or anything like that. For the last two years my goal has been to purchase a multi-family rental in the Cleveland area, but I have been on the outside looking in. Mostly, I have been absorbing as much information as I could and saving enough capital for a 20% down payment.
My wife and I are now thinking about selling our SFH to "upgrade" to a larger house with a yard, and by upgrade I mean in size only, we are looking for another house that needs work. I deally, we would like to sell our house at a profit and purchase a larger SFH (primary) with a 5% down payment and use the remaining profit to purchase our first multi-family rental with a 20% down payment.
The Facts:
Purchased our current SFH in Cleveland's Tremont neighborhood at 90k with a 30 year fixed @ 3.5%. Took out a subsidized home equity loan for 65k @ 2.5% amortized over 12 years. The neighborhood and the house have appreciated significantly over the past 3 years and current appraised value of the home is 230k. Currently, we owe 145k total across both loans on the house.
Our Plan:
Sell our current SFH. We are assuming we would sell at the current appraised value of 230k, freeing up 85k in equity. After paying a real estate agent (6%) and closing costs (4%) we would have 76,500 in net profit. We would then purchase a new SFH as a primary residence with a 5% down payment, looking for house less than 300k so max down payment would be 15k (willing to put more down if necessary). We don't want to increase our monthly payment by much, currently at $1,100. Use the remaining $61,500 to purchase a multi-family rental. Purchase price would be less than 200k @ 20% down, so we would have a max down payment of 40k leaving a balance of 21k for repairs or improvements and a good base for capital expenditures that come up down in the first few years.
I would love to here the group's thoughts on this idea, and if this is totally off base or not smart at all. I am a beginner and to me this seems logical, but may not be feasible as I have not seen it discussed much here. What other factors do we need to consider? Interest rate changes, getting two conventional loans in a very short time period if not simultaneously, tax implications, etc.
Appreciate any feedback.
Mike