Using your primary residence

5 Replies

I've been told twice now that using my primary residence as my first rental property would be a good move. I've thought about it and I'm starting to agree, I would just like some feedback on the approach I want to take. We were initially looking to sell our home and use the profits from the sale as a down payment on our next house. But now instead, hold onto the property as rental, buy a new primary residence with an FHA loan and get a little more sq footage for our growing family. My question is though, is it a backwards move to open a new mortgage that's just going to increase our monthly expenses with a higher payment? Also, how do I approach this situation correctly to keep building and acquiring properties after we get settled into our new home. If I need to clear anything up, please let me know because this may be a winded post. Thanks in advance!

I've rented out my primary residence after moving on 3 different occasions, and in general it's worked out very well. As long as it's in an area that rents for a decent amount relative to the price you would sell it for, I would say go for it. If you've built up significant equity, you could cash our refinance prior to moving out, and use some of those proceed as a down payment on your next home. You may be able to avoid PMI that way. It's significantly easier to unlock that equity while you're still living there than once it's an investment property.

@Joseph Cacciapaglia thank you! So I owe 140k on the property and on the conservative end, it's worth 190k. The mortgage on the house with PITI is $1230, should be able to rent it for $1500-1600. There is gonna be a need for small repairs prolly coming in at 5k to get it fully tenant ready. Would it be going backwards in my case if I were to buy the next house with a mortgage of let's say $1800 or so, cause we do need an upgrade in sq footage for our growing family but I also want to continue building my portfolio. So a sacrifice may need to happen need be with the next property, just want to approach it correctly to continue to grow.

@Joseph Cacciapaglia and to address the refinance portion. Is that something I should do to avoid the PMI in the next house or do I keep the equity in the first home and just use some of my reserves for the 3.5% down using an FHA loan??

Originally posted by @Tim Sipowicz :

@Joseph Cacciapaglia thank you! So I owe 140k on the property and on the conservative end, it's worth 190k. The mortgage on the house with PITI is $1230, should be able to rent it for $1500-1600. There is gonna be a need for small repairs prolly coming in at 5k to get it fully tenant ready. Would it be going backwards in my case if I were to buy the next house with a mortgage of let's say $1800 or so, cause we do need an upgrade in sq footage for our growing family but I also want to continue building my portfolio. So a sacrifice may need to happen need be with the next property, just want to approach it correctly to continue to grow.

It sounds like that should work out just fine as a rental with your current debt. I don't think I'd bother with a cash out refi though, unless you can get some savings on the interest rate. I don't see acquiring a new property as going backwards. As long as you can afford it, and you really need the space, this seems like a positive step. I would especially like it if the new purchase would also make sense as a rental some time down the road. However, when you're purchasing a home you're going to live in, you can't view it from a purely investment perspective. It has to work for your family too.

Thanks @Joseph Cacciapaglia . I'm going to talk to my lender and see if a refinance would save me any money in terms of a lower rate, not exactly sure just yet if I'll be pulling money out, we'll see what options we are dealt. This second home will eventually be an investment property but you make a great point, still have to have that balance.