Hello! I need some help sorting this out in my head. We have a LTR that was our primary home. Purchased in 2007. Bought for $220,000. Currently owe $100,000. Rents for $2100/month. Mortgage is a 15 or 20 year (I can't remember) so it's higher than usual. Therefore the rent barely covers the PITI by $200/month. Current market value for the house is about $265,000.

Option 1:  sell soon, make about $150,000 after it's all said and done.  Take that cash and use it as down payments on less expensive houses that, when totaled up, equal more than $2100 cash flow.  

Option 2:  keep it, dump money into it until it's paid off.  Have a $265,000ish paid for house that cash flows $2100/month.  

Option 3:  do option 2 but then take out a line of credit on the equity and buy more houses.

Option 4:  something I haven't listed here.

Thanks my friends!

I would first see if there is a home you would like to buy for 150k which will cash flow oveR $2100 


what is your current interest rate?

Can you refis the house to get

To $2100 cash flow?

are you sure it’s only worth 265 it seems like a very small appreciation over the past seven years?

Hey Alicia, please take my advice with a grain of salt but if you hold onto this property and you try to rent it out, the rent doesn't even cover for the mortgage.  I would sell it and buy a house/multifamily or two where the rent does cover the mortgage.  You just want to make sure you have some reserves just in case you need to make repairs to the property. 

@Michael Plante I wouldn't buy one house for $150,000.  I'd buy 4 or 5 houses around $100,000-$120,000 using the $150k as my down payment money.  I would probably make $400-$500 cash flow per house if I did that, but it would be a lot more work with 4-5 houses vs just one.  I just always go back to the fact that there is not one house I've ever owned that I'm glad I sold.  Once I looked back on all the houses I should have kept, I became a house hoarder, lol.  

@Benjamin Wong It is covering the payment.  By $200/month. We have been renting it for many years since we moved out.  

Hey Alicia, sounds like you got a plan.  I would sell to use that money for the down payment. Definitely look into multifamily units.

@Alicia C. What are your longer-term goals? Are you wanting to build cashflow with leverage or are you looking to slow down and deleverage while increasing cash flow? Like @Michael Plante suggested a refi might give you the cash flow you are needing, and if you don't take cash out, you are looking at a payment on 100K at today's rates that isn't much. However, if you are looking to scale and set yourself up for larger gains down the road and want to put the work then I would sell and get you more properties cash flowing to your standards. 

Hope that helps!

@Alicia C.

I’m not a big Brrrrrrrr advocate. But 7 years ago I’m assuming your interest is higher than what’s available now?

Talk to your mortgage broker and see your options. If it’s a 2% difference (speculating) refinancing could be a great play.

Option 1 Refinance and don’t pull any equity out and decrease your monthly payments/increase cashflow.

Option 2 cash out refinance keep 20% in the property and start over, this could either

increase monthly payments and kill cashflow,(not worth doing then selling the house would be the move)

Keep payments the same and give you some cash to go buy more properties. (Worth doing)

Or lower payments/increase cashflow and give you some cash to go buy more properties. (Definitely worth doing)

It all depends on that unknown interest rate that you are currently paying. Definitely worth talking to your lender!

@Jacob Lapp   Good points!  However - our interest rate on that house is 2.8%.  That's why we didn't sell it when we moved out in 2013... I told my husband there was no way I was selling a house that had a 2.8% interest rate!!  That was VERY low at the time.