Sell the house to pay off debt?

[Maki Bick]

Need Advice from Experienced Investors!

I’m still new to real estate, so my knowledge might not be perfect—please be mindful!

We’re debating whether we should sell our rental property to pay off all our debts. Right now, we’re carrying about $60,000 in debt ($40,000 in credit cards and a $20,000 car loan). These were financial mistakes we made when we were younger, and unfortunately, they snowballed over time.

We currently rent but own a rental property out of state that cash flows $600/month and has about $190,000 in equity. When we moved, we turned it into a rental, hoping this would be the start of our real estate journey—something we’d like to continue once my husband retires.

Some key details:

My husband is active duty and will retire in 3 years.

We have one final move coming up this summer to Raleigh, NC.

Our current debts are crippling us—the high interest makes it tough to stay afloat every month.

The plan I proposed to my husband:

Sell the rental property.

Use the proceeds to pay off all our debts, set aside emergency funds and a down payment for our next home.

Free up $1,500/month from debt payments, and that also can stash in a high-yield savings account.

Regain full VA loan entitlement, allowing us to purchase a multifamily home and use the house hacking strategy for up coming move.

Avoid capital gains tax, since April marks five years of ownership, and the tenant’s lease ends in May.

This wasn’t our original plan, and we hate the idea of using our equity to pay off debt. But at the same time, it could relieve our financial burden and set us up for future investments.

What would you do in this situation? Would you take a different approach? I’d love to hear your insights from those with more experience.

Thanks in advance!

[Rick Pozos]

Dont take the easy way out and sell the house. You will regret it in 10 years when the house has 300k in equity.

Right now, the house probably does NOT have 190k in equity. Probably 100k. Once you pay realtor fees, closing costs, sellers want 10k for points and concessions. AND prices have come down a bit in the last few years.

Get a good grip on your personal spending and CUT BACK on everything for a couple of years. You had some lavish spending for several years, now cut back for several. Once you are in the habit of not spending so much, with no debt in a few years, you will be able to save and invest like crazy!! 

ps Google  'Dave Ramsey' and 'Debt Snowball'