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Buying 2nd primary residence and renting first home
My wife and I currently Iive in our that has a detached ADU we rent for about $1500. We are thinking of moving out of the main house and renting it for $2300. We're almost breaking even to cover our mortgage. Our mortgage for the home we bought was high interest rate of 7.1% where our mortgage is $4k.
So the question is should we purchase a home we saw for 480k now since we found some great trustworthy tenants to occupy our main unit, is this a wise investment or way to build portfolio? ( we qualify for a second home without having to rent our house fyi) House we want to buy, we plan on living there for a while.
Also we are about to have a baby soon :)
We both make 220k$
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#2 General Landlording & Rental Properties Contributor
- Investor
- Poway, CA
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#2 General Landlording & Rental Properties Contributor
- Investor
- Poway, CA
Your existing property will be large cash flow negative when properly including all expenses. Are you prepared to supplement renting your existing home possibly for years?
I am not personally adverse to negative cash flow if the property is expected to produce a good return, but negative cash flow can get old fast. Especially the first time something bad happens (and something bad will happen) such as an eviction, slap leak, collapsed sewer run, new roof, etc it could be challenging to see the positive of having a cash negative rental.
Make sure you are mentally prepared to supplement this property for potentially years through some difficult events.
good luck