I'm new in the forum, want to start investing in Real Estate. I have a question on what would be the best approach to invest. We have a big house in a growing area in Orlando, FL. Paying out mortgage is not that easy, we are considering in selling our home to buy a smaller one, but this area in under development, so I know our house will appraise more in the next few years. We barely make it to pay everything, we have no extra money to invest. So, if we buy a smaller house we will be more comfortable making the mortgage payments and have some money to invest. But, I was thinking also what could we do and make our big house an investment property. I know is going to be super difficult to rent to a single family due to the price and we cannot afford to have any vacancy nor losses. Any ideas, what should we do?
I think that selling your house and moving to a house where you can afford the payments is a smart move.
That will allow you to save you cash which then you can invest that cash into assets that will produce cash flow for you.
Your personal residence is not an asset. It's a liability!
There are so many things to consider, the way I will go about it will be by acquiring a debt weapon, home equity line of credit maybe for 20,000 and use that to pay down your principal there are some good youtube videos that will explain how to pay down your mortgage faster and save thousands of dollars in interest, but you need to have at least $500 of cash flow each month for that to work or use that to pay of a car payment faster anything that will increase your debt to income ratio so you can start saving more money each month cut down your monthly bills pay off all credit cards anyway you can i will try to get out of any car payments sell the cars buy a use one before selling the house, rent a room is a big house. obviously like i said lots of things to think about do you have kids so maybe a roommate wont work and your finances with out looking at them is hard to plan but I will try to make that house the investment get created if you have good credit that’s exactly how i started i hustle pay down my principal using the HELOC technique and when my equity become more because of lowering the principal I call my lender and increase my HELOC amount to the point that i was able to buy a house cash using the HELOC my HELOC became my checking account and i was paycheck parking all my income in the heloc is hard to explain what i did in a text but i hope this help you in getting created and into looking at more information before you sell or selling is the best way to go about it.
Marvin, I think it's a perfect time to sell with the recent stock market volatility we might be at or near the top. Even so nobody can predict the exact top of the market but we are so close that I would say SELL SELL SELL. List it high and if you don't get an offer that you like you can always delist it too. Brokers only charge you if the deal closes so listing it is no risk. And if you do close and have a gain and it's your primary home I'm sure you're aware of both the $500K married couple exclusion to pay no taxes and/or the new tax laws that lowered income taxes. It's a great time to sell, John
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When you own a home you can not comfortably afford the only option is to sell. If you do not sell before a financial bump in though road occurs it will be too late and you will likely lose it all.
Take a good, long , hard look at your DAILY expenses...then minimize them. If you are STILL struggling after getting rid of the car payment, the Starbucks habit and the landscaper SELL.
Otherwise, get with an agent and have them answer the question of whether you can or cannot feasibily Rent this out at a profit or very least break even. This way the mortgage is being paid down for you AND you can make a play at the appreciation you seem very sure of. I’m not one to speculate but to each their own.
Look into the equity you have in this home and get informed (i.e. post another question) about how to use it to potentially downsize. Best case scenario you downsize into a duplex or triplex and live “rent free” in one of the units.
I don’t know your market BUT the biggest risk I’ve ever seen anyone take is NOT taking any
Since your area is already developing I'm sure you have some equity in your home already so you will profit from selling your house now.. If you want to start investing in real estate and be able to more comfortably afford your monthly mortgage payments my suggestion would be to sell your house and purchase a multi family property anywhere from 2-4 units. This way you could live in a unit and rent the rest out. It would solve your issue of cutting it close with bills every month and you would get right into investing.
Thanks everyone for your inputs, I really appreciate your comments. I think we will sell our house as suggested.
Did you end up selling @Marvin Perez ?
I sold a home I had lived in for many years that had appreciated in price. I was able to exclude much of the capital gain from taxation due to the personal residence exclusion (https://www.irs.gov/taxtopics/tc701).
I moved to an area with a lower cost of living and am renting while I assess my opportunities for buying a smaller home at a lower price. In theory, I could have fixed up my previous home and rented it out. But I've never been a landlord before and didn't want to make the newbie mistakes with my accumulated home equity (which is in a different state from where I'm living now). Previous home equity in the form is cash provides me with alternatives, including remaining a renter if that's what I decide to do.
Any update? I'd concur with a few others on here and say sell while the market's up. If the house is as big as I'm picturing you could get a nice triplex or even a quadplex, go as big as you can, and live in a unit. Sell!
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