rent ,sell or refinance primary home

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rent ,sell or refinance primary home

Deb W.
Louisville, CO · Member since 2016 · 1 post · 0 votes

Hello all,

We are a married couple that are now early retired, 62 and 63. We have very little income and are not collecting Social Security yet so are living off of savings and looking for some cash flow. We own our own home free and clear which has appreciated nearly double in 6 years to $515000 and is fully paid for. The market has become very expensive where we live. We are debt free and have a lot of assets (mostly tied up in IRAs)

Should we rent out our paid for home which would bring about $2500/mo before expenses and is in a popular rental area? or try to get some of the equity out by refinancing if we can? Or just sell, buy a different primary home and look for a cheaper market for a rental? It seems that renting would be more lucrative for cash flow and we would only have to manage one home- but we would have to finance another house for our primary home which would lessen the cash flow. Also, we have considered renting our home for vacation short term renting, but that would be  difficult to find a place to stay while doing so.

We also own half of a vacation home in a different state, but have never rented it. The HOA only allows 30 day or longer rentals and we do want to keep using it about 2-3 times / year. Its not an option to sell this house at this time.

We are new to the idea of leverage since we grew up with the old rules of investing in a 401K and IRAs and save and save. We have looked at perhaps moving some of the IRA money to a Self Directed IRA but have read many posts that they are not the best option. We just aren't sure about finding a loan with no income.

We are new to the cash flow idea so are confused by all the choices. Thank you for any advice.

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  • Jared Bouzek
    Lender · Denver, CO · Member since 2015 · 404 posts · 227 votes
    9y
    Hi Deb Walker and welcome to Bigger Pockets. From reading what you wrote, it sounds like your scenario is relatively complicated and there are probably a lot of details you don't want to post on a public forum. From a mortgage qualification perspective it sounds like you could have a couple of options depending on whether you want to stay in your current house or would prefer to move. One option that would probably be very helpful to you would be a reverse mortgage. Depending on some of your specific circumstances you could use this to access equity without introducing a principle and interest payment and just continue to pay your taxes and insurance as you are now. Another option is that under conventional mortgage guidelines you can potentially use your assets as qualifying income if you were going to purchase a new primary residence and you were uncomfortable with the reverse mortgage. You would only use this if you plan to move because you cannot pull cash out when you're using assets as qualifying income and it can only be done on a primary or second home. I feel like it's hard for me to be much more specific than that but it's difficult not knowing more of the specifics of your scenario. That should at least give you a starting point. Let me know if you have any other questions.
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  • Brent Coombs
    Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
    9y

    @Deb W., likely, it largely depends on how far down the property ladder you're prepared to go for your next primary. How EMOTIONALLY invested do you need to be in deciding where you live?

    If you can't see yourself settling in a house that's worth less than half the value of your current one, (or, rent a property for less than half what you'd get by renting out your current one at the same time), then your cash-flow-increasing goal may well be severely limited?

    Either way, I recommend that your goal should be to (at least) PRESERVE whatever asset/capital base you already have now, and live off its cash flow / interest (only). I do agree that the optimum asset/debt ratio to help you achieve your wealth/income goals won't be super-easy to decide.

    You wrote: "We have looked at perhaps moving some of the IRA money to a Self Directed IRA but have read many posts that they are not the best option". I'm curious about who wrote those posts, and where, and why? Any chance you could copy/paste some links? Welcome to BP. All the best...

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