As I mentioned in my New Member Post I bought the house I am currently living in three years ago. It is a 3 bed 1.5 bath with a full basement and single car garage on about a 1/4 acre. I purchased the property with the intention of updating it, and then renting it out. Long story short life got in the way (more on that in the New Member Post). Now my wife and I are finally in a postion to finish the updates and we are faced with a decision to make. I purchased the house for $150k and currently have about $11k wrapped up in new kitchen, heat pump and roofing. I'm estimating another $4-5k for bathroom and flooring. My mortgage runs $830/month and rent in the area for a 3 bed 1.5 bath is around $1,400/month. I would be happy with making $600 profit every month especially since I have updated nearly everything in the house and it should be relatively low maintence for the foreseeable future. But, the market has gone up considerably in the last three years. The house across the street from me which is the same style but it has the garage converted into a living area sold for $205k last year, and similar properties are selling in the high $180's to mid $190's.
This is a whole new world to me, and now I am questioning if it would be a better move to sell the house and try find a better deal, or if I should stick to my original plan and rent the property. I'm reading through The Ultimate Beginner's Guide now, but I still dont know the first thing about calculating my potential ROI and all the other fancy lingo that the pros use.
1. Take a HELOC out to 90-95% LTV while you currently live there as primary residence.
2. Rent it out.
3. Put cashflow money under a mattress until you figure out what the hell to do next.
I don't think I'm following Aaron. Are you saying to get a HELOC and use that to buy another property, so I can rent out the property I get the HELOC for? Or use the money to buy a more profitable rental?
Okay so after reading about the 50% Rule, I have a few more questions. If I escrow my taxes and insurance since this property is my primary residence, they don't count toward the expenses, right? As far as utilities go, is it common practice to cover utilites for properties whose utilites are seperately metered? I always assumed utilities would be covered by the renter, unless there was a situation of a single meter on a multifamily unit, or you were renting out a spare room, or in-law suite.