Sell or refinance for rentals?

Question

Hey guys, I'm new here and new to real estate investing and would like some advice. Me and my wife are trying to decide whether or not to sell our primary house ( around 100k in equity) and split that money to buy a different primary house and also a rental. Or should we just refinance and buy a rental? Overall, we are looking to reduce our monthly mortgage payment and be a little more financially free by becoming full time real estate investors!

Thank you in advance,

Eddie

Thank you in advance,

Eddie

Edward Sloyan · Answer

@Andy Eakes that's some great info man thank you! I'll definitely look into that to see what my best options are. We understand the potential financial freedom real estate has to offer and we want to get involved asap. It's just what makes the best sense. We have never refinanced in this house. We've been here 5½ years so far, house is in great shape with little to do. Maybe new countertops and appliances.

We live in upstate New York about 2 hours north of NYC. A ton of people from the city are flooding north and driving the market up. So many good options I'm just not sure where to start. Was also thinking about doing an Airbnb, considering we live 15 minutes from both Hunter and Windham Mountain which is huge in the winter for skiers. They are very popular all year actually as they keep adding more events and fun activities for all ages.

thanks again!

Eddie

Andy Eakes · Answer

@Edward Sloyan I am not sure what part of the country you live in, but it sounds like you're in a great position to invest right now! Depending on whenever the last time you refinanced, that could be an option. Rates are seriously the lowest they have ever been, so you could get a great rate! Then you can rent out the house you have now, and use the cash you pull out to invest in a property. I recommend consulting an experienced agent first though, they can help you out a lot.

You could also take out a Home Equity Line of Credit (HELOC). Again, consult a professional before doing this, but basically you can take out a line of credit on a percentage of the equity you have in your home (Usually around 80%). That way you can continue to use that money over and over as long as you're paying off the debt and interest (much like a credit card). People tend to do this when remodeling, but you can also invest with this. Something to think about...

It is also going to depend on where you live and if your current property would positively or negatively cash flow if you were to rent it out. In CA where I am, properties have legendary appreciation, so the buy and hold play makes a lot of sense.

If you don't think that you would positively cash flow on your property (even after a refi and/or any repairs you could make to add value), then selling could be a good option too. With rates so low, many people are looking to buy and pay more than the asking price. If you have an attractive property, you could get some good money for it.

I hope that helps!