Questions about a first possible rental
Hello Everyone,
I am completely new to RE investing, but I have been thinking a while about a possible way to get my feet wet into rental properties, but I'm not sure how exactly it can be done.
Back in 2014 my mom bought a new construction townhome in downtown Anaheim in California. It is in a very good area and neighborhood, 5 minutes from Disneyland, less than 10 minutes from Angel Stadium and the Honda Center and close to schools. It is a 3 bed, 2.5 bath 2 level 1300 sqft townhome, she purchased for 435K. For anyone not familiar with the Orange County market the prices are astronomical right now and pretty much at their peak. She used the proceeds from the sale of her previous home and put a 200K (!?!?) down payment into this current home under a 30 year conventional loan at a very low 3.6% interest rate. I do not live with her, so there are 2 vacant rooms. I am a real estate agent in my area with MLS access so I am very familiar with the comps, rentals, etc. and her exact unit would rent out around $2500-2600 a month. Her current mortgage payment is $1080/month because of her large down payment, and the PITI along with the HOA fee is a total of $1800 / month. All said and done it costs her about $1800 a month to pay for all of her home's expenses.
I am trying to think of a smarter way to use those 2 vacant rooms in her home, as she lives by herself and does not need a home that large especially with 2 empty rooms. I want to rent out the entire home and find my mom a smaller home to live in. The problem is she does not have enough cash reserves for a down payment on a new smaller home to purchase in order to rent our her current home because the prices are so high in Orange County right now. I've brought up the idea of her just renting out the 2 other rooms and still living there, but she rejected that and I understand because she is older and lives by herself and does not feel comfortable having strangers live in her home with her.
Pointers:
-bought the home in 2014 for 435K
-put 45% down with her own cash 200K
-she owes about 212K
-conventional loan 30 year fixed at 3.6%
-lives in home by herself, 2 vacant rooms
Is there any way, ideas, or strategies to use the equity she has in her current home or refinance to pull cash out to have enough for a down payment on another smaller home so then we'd be able to rent out the current property? I don't know much about refinancing or HELOCs I've read up about them but I wanted to ask BiggerPockets to see what others had to say about what possibly could be done. Thank you everyone!