Should I Stay or Should I Go?

Question

I own a house in the Charlotte NC area. Details here:

Value: $215-220k

Owed: $110K At 4.375% interest

Repairs and upgrades already done: $13K

Repairs to be done if renting: $12K

If I sell the house now, I’d end up with $85-90K cash, move in to my parent’s house until I find a larger home to buy for myself. I’d not put the full amount into the new house because I’d like to purchase a rental as well.

Would it make more sense to stay in this house, 50K cash out refinance it, do the $12K of additional repairs and then rent it out when I find something else to buy? Or sell now, pay off the 25k student loan debt I have and be debt free, and find a couple of properties in 6 months or so when the foreclosures start to come in from Covid.

thanks

Jordan

Anthony O. Porter · Answer

@ Jordan Lilley- I do agree with Jody Sperling.  Use this home as a rental.  Move in with your parents and get a HELOC which you can use as a downpayment for another home, which will be your primary residence.  Even better, get a duplex or triplex and use one unit as your primary residence and rent the other unit/s.

Anthony O. Porter

Porter's Property, LLC

Caleb Brown · Answer

I'd rent your current home out. Use the HELOC to house hack a multi unit. Then a couple years down the line buy a nice home. Build a strong foundation and start your portfolio.

Jody Sperling · Answer

Why step backwards to move forwards? You own a house now. Use it as a rental. Contact someone in your area who rents regularly. Verify that the 12k you think you need to spend, you really need to spend.

I way overestimated what I needed to do to get my first rental move-in ready.

Also, why so fast to use a cash out refinance? You could consider a HELOC instead, keep your equity in the current house, making it cashflow much better, and allowing you to have a better debt to income ratio.

Use the HELOC to buy a primary instead.

Anthony O. Porter · Answer

Porter's Property, LLC

Anthony O. Porter · Answer

@Jordan Lilley - It all depends on how far you are in the 5 years that your interest is fixed (5/1 ARM).  If you are early (1-2 1/2 years or even 3 years) in the 5 years I would get the HELOC which you can use as a downpayment for another home, which will be your primary residence. Even better, get a duplex or triplex and use one unit as your primary residence and rent the other unit/s. Whereas, if you are over 3 years in, I would refinance with a cash out and use the cash as downpayment for the other property and pay off the student debt.  You are in a great place because of the equity that you have in the home.  Happy investing!

Theresa Harris · Answer

You are planning on buying a rental down the road, why not sell your current house and buy a rental now?  You can live in that (rather than with your parents) and get it with less money down if you live there for a year.  Find a duplex or place with a suite and rent that out (or live in the suite and rent the main house).  It wouldn't be your forever home, but a  place to stay while you look for your own home.

Jordan Lilley · Answer

Thanks Jody,

One thing regarding refi vs HELOC. My 4.375% interest rate on my current property is a 5/1 ARM. I would think that I should refinance it to lock in a lower interest rate for the loan. I'm new to the investing side, so I want to make sure I'm looking at this correctly.

Should I Stay or Should I Go?

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