I bought a 3 bedroom, 2bathroom home on the California coast at the bottom of the market in 2011 at a 3.99 interest rate. I also have a 4th backyard bedroom on the property. I would like to buy a second home and rent out the first. I'm in a very hot rental/airbnb market and could get great cash flow. I have rented out/airbnb'd rooms on the property in the past, so I'm familiar with demand. I'm a single mom, with an average-moderate income, and not much savings besides retirement. So, I would need to do a 3.5 percent down on the second/ new primary residence home. My son's child support check dries up when he graduates high school in June, so I was hoping the rental cash flow could partially replace the lost child support and help pay for his college. His biological father has said he won't help with college. What steps do I take to make this work? I want to purchase before the child support ends, as this is a significant part of our household income. I'm confident I could have a renter before even moving out due to demand. Positive cash flow potential is $1,000 per month, more for airbnb. I just couldn't get approved for two mortgages with my income. I would appreciate advice on what steps I should take.
@Rena Spooner , in general terms, buying a second home a the top of the market will lower the benefit (in coming years) of having initially bought at the bottom of the market.
Afaik, Lenders will not just take your current income (including child support) and extrapolate it as being locked in, and add it to the $1000/m cash flow you'd also be getting with your soon-to-be rental. They tend to ask questions that will make it apparent to them that certain moneys are about to dry up. So in that regard, I don't reckon panicking about making a decision before next June will help you. [If others disagree, I'd like to read why].
So if your motivation is purely to maximize your current investment, perhaps find out how much the cheapest fixer-upper small studio, in as worse a neighborhood as you could stomach, in as far a radius from your work as commutable, would cost. Then, multiply that number by 3.5%, and that can be your immediate savings goal. Gotta have a reason, right?
You've got the right mindset. Don't give up. Congrats on your 2011 success. Welcome to BP...
Thank you Brent Coombs. I forgot to mention that my second home would/could be smaller, and wouldn't need to be on the coast-high cost of living area. I also have almost perfect credit. Good points, I figured disclosing child support timeline would be part of the process. Thank you for the advice and encouragement!!!