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Rudy Salomon
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Hi team, I would like group feedback on on my current buying and selling situation.

Rudy Salomon
Posted May 31 2023, 14:40

Hi Bigger pockets team, 

Here is my current situation. I am currently assuming a loan that has a 2.6% interest rate locked into the life of the loan and I am getting it $70k under market value. I am assuming $135k and agreed on a $175k Price. My spouse & I love the home and plan to use it as a our primary, clean it up and rent it out after 1-2 yrs of living in it. With loan origination fees I am paying the difference of $46K out of pocket which took me almost 2 yrs to save up for.

I am deploying my cash savings of the remainder to close on the home which has me exposed for current emergencies or worst case scenario I have to divest stock positions form my Roth or 401k I didn't plan to for the next 5-10 yrs, which I don't want to do.  For context I work as an engineer and have a descent salary of $110k/yr and my spouse make a salary of $30k/yr with our goal to become more independent in the next 3-5 yrs 

Now here is where I could really use help in executing a decision:

My current home I owe like $84k and owe like 13 yrs on the loan and have a 3% fixed interest rate for the life of the loa. our monthly payment is $1050 and we could rent our current home for $1600-$1700/mo. Gaining us a potential profit of $7000-$8000/yr minus operational costs etc etc. cutting it down to potentially 4-5k per yr. If we sell we will potentially make close to $120k cash free after realtor fees etc etc since we have been in the home for over 7 yrs. We are having trouble deciding on whether we should sell or rent it out. We have learned alot within these past few years and it would probably take me another 1.5-2 yrs to save up to $50k again with our initial expenses, or if we sell we will replenish our cash savings, plan to buy more property, not utilize all of the money from the home sale, maybe use 50% of the cash received from the sell of our current home to build a portfolio, and lock the rest up as a cash emergency on stand by maybe 20% and the other 30% long term hold for long term growth.

As for me I am a "bet it all on red" kinda guy but my wife is much more conservative and the smarter of us 2 although I am the engineer lol. We have a great balance in our loving relationship and she supports my process. What would you do?   

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Nicholas L.
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Nicholas L.
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Replied May 31 2023, 15:59

@Rudy Salomon

on the deal you're buying - are you truly "assuming" the loan, or are you just taking over the payments?  those are two totally different things.

and, i don't understand the $46K cash outlay.  that seems like way too much based on the price point.

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Rudy Salomon
Replied May 31 2023, 16:53

Hey Nick thanks for the inquiry. I am fully Assuming the VA loan with the bank. I agreed on $175k for the price with seller and I am assuming $135k (what he owes on the loan) so I have to pay the difference amount out of pocket as the bank will not finance the difference. I am keeping the interest rate of 2.6% for the remainder of the loan which is 28 yrs left I believe, I know I know but I will more than likely add 4 extra payments per yr toward principle. The payment will be $1150 or so I believe. Texas has a high property tax rate. (I believe 46th in the nation)

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Erik Browning
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Erik Browning
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Replied May 31 2023, 18:13
Quote from @Rudy Salomon:

Hi Bigger pockets team, 

Here is my current situation. I am currently assuming a loan that has a 2.6% interest rate locked into the life of the loan and I am getting it $70k under market value. I am assuming $135k and agreed on a $175k Price. My spouse & I love the home and plan to use it as a our primary, clean it up and rent it out after 1-2 yrs of living in it. With loan origination fees I am paying the difference of $46K out of pocket which took me almost 2 yrs to save up for.

I am deploying my cash savings of the remainder to close on the home which has me exposed for current emergencies or worst case scenario I have to divest stock positions form my Roth or 401k I didn't plan to for the next 5-10 yrs, which I don't want to do.  For context I work as an engineer and have a descent salary of $110k/yr and my spouse make a salary of $30k/yr with our goal to become more independent in the next 3-5 yrs 

Now here is where I could really use help in executing a decision:

My current home I owe like $84k and owe like 13 yrs on the loan and have a 3% fixed interest rate for the life of the loa. our monthly payment is $1050 and we could rent our current home for $1600-$1700/mo. Gaining us a potential profit of $7000-$8000/yr minus operational costs etc etc. cutting it down to potentially 4-5k per yr. If we sell we will potentially make close to $120k cash free after realtor fees etc etc since we have been in the home for over 7 yrs. We are having trouble deciding on whether we should sell or rent it out. We have learned alot within these past few years and it would probably take me another 1.5-2 yrs to save up to $50k again with our initial expenses, or if we sell we will replenish our cash savings, plan to buy more property, not utilize all of the money from the home sale, maybe use 50% of the cash received from the sell of our current home to build a portfolio, and lock the rest up as a cash emergency on stand by maybe 20% and the other 30% long term hold for long term growth.

As for me I am a "bet it all on red" kinda guy but my wife is much more conservative and the smarter of us 2 although I am the engineer lol. We have a great balance in our loving relationship and she supports my process. What would you do?   


Aw man, you're actually in a good spot to compromise with you and the wife however Texas is the obstacle here lol. I'll explain.

The departing residence that you have with $84k remaining could be refinanced as a cash out refi and you can withdrawal up to the amount where you still cash flow a decent amount if you rented it for that $1600/month amount. The cash out could net you maybe $40k or so while still cash flowing the departing residence. You could continue to assume the existing property, and then you'd have that additional $$ from the cashout in the event you had an emergency or wanted to grow it for the next purchase.

Problem is, I assume the home you are in now was purchased with a VA loan, correct? If so, Texas will not allow for a cash out refi on VA loans. It's in the TX constitution. You could switch to a conventional, but conventional rates are higher at the moment and it might make that $40k, non-taxable lump sum down to $30k or so.

Listen, yeah the rates suck, but if you can continue to move forward on your property acquisitions by capturing some of the equity and doing what you're doing with the paydown, then the rate does not matter as much. And besides that, you have the convenience of refinancing (rate and term, not cash out) at your leisure when rates are more palatable.

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Rudy Salomon
Replied May 31 2023, 20:29

Hi Erik, thank you kindly for the outstanding suggestion. I was considering the cash out refi option and I do agree “Texas” being the obstacle lol. Although I’m born and raised in the state lol. 

Our current home is not under VA and solely under my wife's. But I still am responsible for property taxes as our state has a rule for that with married couples. As for refinancing even with my outstanding credit I didn't want to borrow a small amount of potential 40-70k on a 30 yr term with a 9-12% interest rate. Thought that was very high tbh. I'd rather take out a bunch of zero interest credit cards with the 18 month option at that rate lol. Even borrowing from my stocks and 401k was a 9.9% rate at 360 months. I chose not to go that route. The only set back currently is I save an avg of 70-90% of my salary a month. For these next few wks with my current home preventative maintenance and up keep list I will have to deploy my monthly savings to those expenses. I estimated $4k for my current home and $6k for the new home.

We don’t necessarily have to sell our current home now, money will just be a little tight a month of 6-8months for sure