How do I analyze my home as a rental?

Question

My situation:

Great Credit, Income $180k/year, Rural Midwest, Only debt 155k on a $190k house, 38k EF, no savings for investment yet but able to save 2-4k monthly in about 6 months (currently finishing funding college funds).

One option: turn my current home into a rental and moving up in house. My home is a little too nice in this area to be an ideal rental home but I already have the loan in place. How do I analyze the deal taking into account that I could save $50k on initial investment to get into the game?

I could rent my house house out for $1300/month and have it on a 15 year fixed at $1500/month. The negative cash flow isn't a problem. I could easily make a second mortgage payment. Time is an issue. I don't have time for rehabs, and need "turn-key".

Nicholas A Kligmann · Answer

I was thinking of converting my current home into a rental instead of buying a lower priced property (as a rental) that cash flows better. House hacking is not an option.

The benefits would be easier financing with a new owner occupied & lower cash up front. The downside is that I like my current home and it's a little higher value than the typical rental home around here. The rental market here wouldn't justify the home's value on it's own.

I don't need anything to cash flow, I just want to balance out how heavy I will be in equities with more real estate. My goal is to have real estate get me from age 50-65 until I can access my tax advantaged plans.

Marc Rice · Answer

@Nicholas A Kligmann

Could you keep your home as a rental now and refinance at a 30 year note for a lower monthly payment, and then do an owner occupied house hack on a 1-4 unit?

I’d be cautious of moving into a bigger and more expensive house if you’re trying to save for an investment property (wasn’t sure if that’s what you meant by move into up into bigger house).