Best use for my current home

12 Replies

Hello everyone! I recently bought a 1 single family for $400k in NYC and acquired a loan for $270k at 3.75% for 20 years. My mortgage is roughly $2,000/month. I lived there roughly for 2 years before I relocated to Chicago for work. Luckily, I was able to find a family that needed a place to stay because their house was caught on file, so currently their insurance company is paying for the rent. However, the repairs to their home should be completed by the end of 2020 and that's when our agreement will end.

During this process, I learned a great deal about what it takes to be a homeowner and about the real estate business. My goal is to acquire more rental properties but I don't have enough fund for it. I'm wondering what are some ways I can accomplish this? How can I leverage my current property?

@Zulu Black , welcome to BP! Lots of great info here, in the forums, articles, videos, and of course the podcast.

Sounds like you may have some equity in the SFR. Has the value increased significantly? Since you used it as your primary residence, if you decide to sell it and make a decent profit, you might qualify to not pay any capital gains tax:
https://www.nolo.com/legal-encyclopedia/the-250000500000-home-sale-tax-exclusion.html

 Is the rental amount covering all expenses and cashflowing? 

@Zulu Black , well welcome to Chicago!  Hope you're enjoying it.  As for neighborhoods in the city, it depends on what you're looking for, what price points you'll be focusing on, etc.  Some of the popular spots for house-hackers are Irving Park, Portage Park, and Jefferson Park to the NW, Avondale, Logan Square, and East Humboldt south of there, and then Pilsen and McKinley Park further south.  Hope that helps, and if I can be of any more help just let me know!

@Zulu Black , welcome to Chicago! Have you thought about house hacking? Once you settle in and are looking to make a purchase, consider purchasing a small multi-family property, live in one of the units, and rent out the others while managing the property yourself to improve your cash flow.

Originally posted by @Zulu Black :

Hello everyone! I recently bought a 1 single family for $400k in NYC and acquired a loan for $270k at 3.75% for 20 years. My mortgage is roughly $2,000/month. I lived there roughly for 2 years before I relocated to Chicago for work. Luckily, I was able to find a family that needed a place to stay because their house was caught on file, so currently their insurance company is paying for the rent. However, the repairs to their home should be completed by the end of 2020 and that's when our agreement will end. 

During this process, I learned a great deal about what it takes to be a homeowner and about the real estate business. My goal is to acquire more rental properties but I don't have enough fund for it. I'm wondering what are some ways I can accomplish this? How can I leverage my current property? 

Somewhere in the thread you said your home is now worth about $550K. If you think that's the case I'd do the following:

  • Verify that number. You may have to pay for an appraisal to verify.
  • Once you have verified the number then you'll have to run some numbers. If you refinanced 70 to 80% of the $550K & pull out the cash, can you increase the rent enough to break even? If not can you afford the negative cash flow on the one asset while you deploy the cash to purchase other assets to offset the negative cash flow
  • I suspect even in NYC you won't be able to raise the rent high enough to break even so the next best thing is to sell the property for $550K, pay taxes on the gain then start looking for investment properties.
  • If you want to avoid taxes and have you've properly identified the property as an investment property (no longer an owner-occupied property) then you qualify for a 1031 exchange. Read up on it.

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