Unsure of the many options I have. Consider the following:
So I bought, I rehabbed, and now to rent and refinance. The issue is we still live in the home and with the interest rates and my wife being a stay at home mom we feel like we can commit to getting into a new property.
We have considered selling and using the equity to get into a newer home.
Selling and renting until we find a deal.
Continue upgrading the house and renting when we have more income.
Just not sure what’s the best option and would love some more perspective.
@Austin Janiszewski if your current primary (Property A) is renovated and will generate positive cash flow after renting, consider this scenario:
Instead of selling, utilize Property A as a source of supplemental income to offset the higher interest rate environment. Interest rates will eventually come down to more favorable terms, but let's say we're looking to pay an extra $350/month to buy Property B just due to higher interest rates.
We can rent Property A and use the positive cash flow to offset that higher payment on Property B. This is a hedging strategy that uses physical assets by leveraging existing debt at a lower-than-market rate to offset the current debt rates.
The benefit of this method is you keep the second property which will double the work your portfolio is doing on the Market Appreciation capture side of your balance sheet.
I'm sending you a DM with more information on how my wife and I did this.
Well for the three options you have listed, I would recommend you compare all three and decide what is the upside vs the downside of each one. I would also recommend you consider the cost to undertake vs opportunity cost of not undertaking that process.
Once you compare all I can say you should have a decision which should be beneficial for you and your family
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#1 Creative Real Estate Financing Contributor
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@Austin Janiszewski hmm, so this is your current primary home? If you have lived in it for 2 years you can sell with no capital gains tax. If you haven't lived in it for 2 years, you will pay some pretty hefty taxes if you sell.
When analyzing our own primary homes there are all sorts of things that we consider that we don't really consider when purchasing an investment property. Investment properties are cut-and-dry. What's the numbers? Do I care about my work commute? Nope. What about my kids education when I purchase an investment property? Nope. How about if my family feels safe? Not at all. With an investment property I'm going to analyze the financial numbers. Other considerations are a distant choice. You can probably think of some other personal needs when looking into your own home. All sorts of things might be different for us.
I'm saying all of this because if a newer home helps your marriage - what's that worth? That's priceless.
Many of us use our early primary homes as the entry point to begin our real estate career. Meaning, we keep them...and don't sell them...and we rent them. Your commitment is to occupy your primary home for 12 months. As mentioned above, there are tax benefits to occupying for 2 years. Buying my own primary home provides the lowest downpayment, the lowest interest rate, the best terms, the lowest closing costs, the most seller concessions, etc. So if you do have the ability to keep that property and buy your next primary home now you have 2 homes. Only 4% of Americans have 2 homes. It's hard to do...but if you can do it, you are on your way. Not everybody has the ability to move every year. And even if you do have the ability to do it now, you may not have it later. So take advantage of it now if you can.
Hope all of that makes sense.
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@Chris Evans thank you for the ebook. Will be reading as soon as I finish my current read.
@Dennis Muno thank you, that’s definitely helpful.
@Andrew Postell that absolutely makes sense. Definitely something to consider. The priceless opportunity of a happier marriage and family vs keeping our “starter home” as a rental.
Thank you!
Would the new deal help generate enough equity to justify all the work you already put in or would it just delay your cashflow timeframe? I'm in more or less the same boat and have avoiding selling at all costs. The first few are always the hardest.
@Chris Evans I'm actually in about the same position and would appreciate learning about your strategy as well. My only difference is I currently have my first BRRRR rented and I'm looking for my next project while I rent.
Quote from @Michael Peters:
Would the new deal help generate enough equity to justify all the work you already put in or would it just delay your cashflow timeframe? I'm in more or less the same boat and have avoiding selling at all costs. The first few are always the hardest.
@Chris Evans I'm actually in about the same position and would appreciate learning about your strategy as well. My only difference is I currently have my first BRRRR rented and I'm looking for my next project while I rent.
There's not enough information to know about how the finances will play out, but I can tell you that it's not impossible for the BRRR method to generate enough positive equity into real estate to fully cover the initial investment.
I have a deal I put under contract yesterday:
PP 230k
Rehab 80k
Buyer paid commission $6300
ARV 400k
Refi at 75% of 400k will recover about 95% of the initial cash outlay.
I just noticed your DM. I'll reply now.