Rental Property Investor · Dallas, TX · Member since 2020 · 10 posts · 6 votes
Hello all, I now live with my family in a single family home (3/2) that I have considered selling for some time. I am undecided and would appreciate some insight as to what could possibly be better to my investing career. If I sell I would use the money to buy another family home and the remainder to acquire a BRRRR property. Another option I have reviewed is to refinance or HELOC my current home and rent it, while using the money to acquire a property where I could house hack. Any suggestions or insight would be greatly appreciated family! Thanks.
How is your ability to get a loan right now (are you maxed out on DTI)?
Do you have a lot of equity in your home?
Do you love your home and will regret selling?
If you're maxed on on DTI, you will need to sell. If you can buy something much cheaper where you still can buy an investment and BRRRR, then you don't "need" to house hack. If you can't buy something cheaper than a house hack is your best bet.
If you have margin on DTI and have a lot of equity in your home, then it depends. If you really love the home, do a HELOC and start BRRRR'ing. If you don't have a preference to keep the home, then a house hack is going to free you up to start scaling faster and grow your portfolio, but you're trading some convenience.
This is the process I walk through with all my new investors. If they come to me and say they're approved for $400k, then I tell them to buy at $250k, so they have some margin for the second deal. Once the "ball" is rolling (you start getting rental income to offset your debt payments) your DTI stays fairly flat as you scale, but if you buy a single family at $400k and then want to invest, it will be a much slower process.
@Juan Beltran sounds like you have the right idea, considering you don't have enough money saved for a down payment. I agree that doing a cash out refinance would be ideal for this situation, especially if it allows you to purchase a house hack. If you were to sell your current home then you have to fact in taxes unless you've lived in it for at least two years, regardless I would hold onto it as a rental. You're at a big advantage seeing as it's a house you're familiar with, assuming you've done some level of repairs during the time you've owned the home. Do you have a lot of equity in the property?
How is your ability to get a loan right now (are you maxed out on DTI)?
Do you have a lot of equity in your home?
Do you love your home and will regret selling?
If you're maxed on on DTI, you will need to sell. If you can buy something much cheaper where you still can buy an investment and BRRRR, then you don't "need" to house hack. If you can't buy something cheaper than a house hack is your best bet.
If you have margin on DTI and have a lot of equity in your home, then it depends. If you really love the home, do a HELOC and start BRRRR'ing. If you don't have a preference to keep the home, then a house hack is going to free you up to start scaling faster and grow your portfolio, but you're trading some convenience.
This is the process I walk through with all my new investors. If they come to me and say they're approved for $400k, then I tell them to buy at $250k, so they have some margin for the second deal. Once the "ball" is rolling (you start getting rental income to offset your debt payments) your DTI stays fairly flat as you scale, but if you buy a single family at $400k and then want to invest, it will be a much slower process.
Thanks for the insight! Current equity is about 100k and we have been here for 5 years. We have been doing all the maintenance in the house and remodels throughout to keep up with the market value around the neighborhood. The only downside I would see is that its at the point where it may need some of the major investments since it was built in 1963.
Wow, this is really great! We truly love the home and the neighborhood, however it is 57 years old and will need major renovations soon and feel that I would be better off using that money into REI.
My DTI is good since I only owe mortgage and a car note with 10k outstanding. That is a great point as you stated... I definitely don't need to go and spend a lot on another home, rather put some aside and use that to increase my portfolio. Thanks a lot Ryan.
I’m in a very similar situation as yourself. We haven’t been in the house as long but probably have similar equity.
From what I understand it might be best to HELOC due to the ability to keep to rent and/or live in the property plus reduce the closing costs that come with cash out refinance.
But then it depends if you can cash flow if you want to rent it.
There is a lot of factors that go into it. Would love to hear what anyone else has to say or more insight to add!
There are many options you can take to start your RE career. We sold our primary residence 3-4 years ago and moved in with family to help take care of our 2 kids, one a newborn at the time. With the sale, we were able to purchase 2 vacation rentals and save money each month by not paying a mortgage or rent and we have enough saved to purchase another home should the opportunity arise. Our VR’s are cash flowing and have appreciated significantly that we can tap into it if we needed to. It’s a sacrafice but it was the best decision we ever made.
That is awesome to hear! Best case scenario, and glad that it is was well worth it. We have family that offered to let us stay at their place for mean time we find another home, if we decide to sale that is.