Hi, I hope I've put this in the correct forum but if not, please direct me where to go.
My current situation is that I'm interested in generating rental income but I don't have enough cash flow currently to make it happen anytime soon. I do have quite a bit of equity in my house though and I'm trying to decide if it would be wise to tap into it or not. We have a 15 year mortgage at 3% and owe 78k with 9 years to go (we bought it for 138k 10 years ago but refi'd from a 30yr to a 15 yr). We talked with an realtor last year and she said if we added a 2nd bathroom, our house would sell for 190-200k, and 6 years ago our house was appraised for $164k. This past year, the market in our area has been hot and prices have gone up. In the past year, we started a renovation to add the second bathroom but ran out of funds (this is an attic conversion and our contractor was way low in his estimate). We have spent 35k but still need another 7k to finish it. This seems like an ideal time to refi to a 30 year and to pull cash out to both finish out renovation and have money to put down on a rental (thinking about a loan between 130-140k).
How should I go about deciding if these numbers make sense. I know my husband is going to have a hard time letting go of our 3% rate and being close to paying off our loan. But, we do not plan on staying in our current house forever so that doesn't seem like too much weight should be put into that. Thinking down the road, our current house might be a good rental if we haven't over improved (need to look more into when you rent vs sell).
How do I decide if this is a smart decision? Ultimately, I would like to have a few rentals for passive income and possibly trying to flip.
Refinancing is costly and 3% rates are no more as you know.
I put a HELOC on my house. A line of credit to use if I need it. All-in cost was less than $300 and it was light on the qualification headaches. They lent us 80% of our home value. I'd look into a HELOC.
Oh, and welcome to BP!
Thanks! I've looked into heloc's but to be honest, I don't really understand them. I'll read up on it more to see if I can make better sense of it.