Good Morning BP community,
We currently have been in our home for 11 years that my wife and I bought after we married. Two kids later we are at that pivotal fork in the road where we are at max capacity with space and schooling for our oldest. My wife is on board with our investing of rental properties goals but would like a slightly bigger house in a better school district. We both love our neighborhood we are in now but unfortunately that would force us to send our oldest to a less desirable school. Has anyone ever come across this situation? My main concern is that we will have to take a step back or a pause in investing but want to eventually upgrade housing. Any thoughts or rule of thumb when upgrading your primary and still stay on investment goals?
If you need a bigger house and better school district for the better of your family then do that. Depending on your credit, you could get a 3-5% down conventional loan on the purchase of a new house. Keep the one you're living in and rent that one out. Maybe even look into doing a cash out refinance if you have any equity in it. You could use that cash to continue following your investing goals.
@Michael Ablan Thanks for the reply. As of now our mortgage is $1730 and rental market we could probably get $1900-2000. I am open to doing this if the numbers work. We also owe $280k and the appraisal would be around $330k according to the comps. How would the cash out refinance work? If we were to go down that road and the numbers work after setting aside for vacancy, cap x, and possibly a pm.
Unfortunately it doesn't sound like it would. You'd be negative cash flow if it was a rental and you don't have any equity for any kind of cash out refinance. It sounds like straight up selling will be your best option
@Mitch Crofts Why not just sell your primary residence? If you are looking at $20-40k in proceeds it's a good down payment on your next house. You're also exempt from cap gains if you've lived there at least 2 out of the past 5 years. Convert it to a rental and you're likely to have negative cash flow and will eventually lose that perk of avoiding cap gains when you do sell it.
Although for different reasons, I upgraded to a house way above my pay grade years ago. I found a property with a small apartment above the garage and rented that out to offset my new mortgage. End result was living in a much better house in a much better location for a net cost of less than my previous house plus it added another rental "unit" to my portfolio.
@Ryan Murdock Thanks Ryan,
Thats what we are leaning to since the cash flow will come out negative after running it through the rental calculator. My biggest concern is that the houses in a better school zone come with a higher price tag. My budget can afford to upgrade slightly but I just don't want to be so strapped to a primary house payment that it slows down my investment goals. Thanks for the tip of offsetting the new place with an apartment.