First Post: Thoughts Renting vs. Selling

[Joshua Parvin]

Hey BP community! I have recently come across the Book on Rental Property Investing and have very much enjoyed it. I have been planning to get into investing in rental properties for some time now. 

Now that I am taking action I wanted to run a scenario by you.

I purchased a home in 2020 two weeks before everything shut down. Got an amazing rate under 3%. Also have built some incredible equity in the last 6 years.

That said, the home I purchased is a larger SFH and I am not sure that it will fit into the portfolio I plan on building. Granted, I am new to all of this, so my ideal portfolio may change in time. But I have two scenarios I am considering.

1. Sell the current home and take advantage of the equity. Then immediately purchase a home that is a better rental property as far as location and size goes. (Lower maintenance cost etc). Live in the new home a couple of years while I study up more on rental investing and then start targeting a second purchase in the next two years. Move into the new home and rent the old. Then rinse and repeat.

2. Rent the current home and utilize a heloc for the down payment on the next home. Purchase a second home and live in it for a couple of years while planning a third purchase. Including the heloc, the current home would be netting around $350/month in positive cashflow after renting it. 

The questions I have:

Have you ever done this and how did it work out for you? For those with experience, do you feel this is a good plan? Finally, are there other options I am not currently thinking about yet?

Thank you so much for your time and response.

Have a great day!

[Lindsay Davis]

@Joshua Parvin,

You’re in a good spot.

Given that renting your existing property out will yield positive cash flow even after you establish a HELOC against it, I think that's a compelling alternative.

You also have an excellent rate on the property for your primary mortgage, so unless there are glaring issues with the asset, my take is that it's worth keeping around. Then, use your HELOC and any additional equity to acquire a second property.