Buying 2nd primary residence and renting first home
Member since 2021 · 28 posts · 5 votes
My wife and I currently Iive in our that has a detached ADU we rent for about $1500. We are thinking of moving out of the main house and renting it for $2300. We're almost breaking even to cover our mortgage. Our mortgage for the home we bought was high interest rate of 7.1% where our mortgage is $4k.
So the question is should we purchase a home we saw for 480k now since we found some great trustworthy tenants to occupy our main unit, is this a wise investment or way to build portfolio? ( we qualify for a second home without having to rent our house fyi) House we want to buy, we plan on living there for a while.
Also we are about to have a baby soon :)
We both make 220k$
My wife and I currently Iive in our that has a detached ADU we rent for about $1500. We are thinking of moving out of the main house and renting it for $2300. We're almost breaking even to cover our mortgage. Our mortgage for the home we bought was high interest rate of 7.1% where our mortgage is $4k.
So the question is should we purchase a home we saw for 480k now since we found some great trustworthy tenants to occupy our main unit, is this a wise investment or way to build portfolio? ( we qualify for a second home without having to rent our house fyi) House we want to buy, we plan on living there for a while.
Also we are about to have a baby soon :)
We both make 220k$
Your existing property will be large cash flow negative when properly including all expenses. Are you prepared to supplement renting your existing home possibly for years?
I am not personally adverse to negative cash flow if the property is expected to produce a good return, but negative cash flow can get old fast. Especially the first time something bad happens (and something bad will happen) such as an eviction, slap leak, collapsed sewer run, new roof, etc it could be challenging to see the positive of having a cash negative rental.
Make sure you are mentally prepared to supplement this property for potentially years through some difficult events.
good luck
My wife and I currently Iive in our that has a detached ADU we rent for about $1500. We are thinking of moving out of the main house and renting it for $2300. We're almost breaking even to cover our mortgage. Our mortgage for the home we bought was high interest rate of 7.1% where our mortgage is $4k.
So the question is should we purchase a home we saw for 480k now since we found some great trustworthy tenants to occupy our main unit, is this a wise investment or way to build portfolio? ( we qualify for a second home without having to rent our house fyi) House we want to buy, we plan on living there for a while.
Also we are about to have a baby soon :)
We both make 220k$
Your existing property will be large cash flow negative when properly including all expenses. Are you prepared to supplement renting your existing home possibly for years?
I am not personally adverse to negative cash flow if the property is expected to produce a good return, but negative cash flow can get old fast. Especially the first time something bad happens (and something bad will happen) such as an eviction, slap leak, collapsed sewer run, new roof, etc it could be challenging to see the positive of having a cash negative rental.
Make sure you are mentally prepared to supplement this property for potentially years through some difficult events.
good luck
My wife and I currently Iive in our that has a detached ADU we rent for about $1500. We are thinking of moving out of the main house and renting it for $2300. We're almost breaking even to cover our mortgage. Our mortgage for the home we bought was high interest rate of 7.1% where our mortgage is $4k.
So the question is should we purchase a home we saw for 480k now since we found some great trustworthy tenants to occupy our main unit, is this a wise investment or way to build portfolio? ( we qualify for a second home without having to rent our house fyi) House we want to buy, we plan on living there for a while.
Also we are about to have a baby soon :)
We both make 220k$
Your existing property will be large cash flow negative when properly including all expenses. Are you prepared to supplement renting your existing home possibly for years?
I am not personally adverse to negative cash flow if the property is expected to produce a good return, but negative cash flow can get old fast. Especially the first time something bad happens (and something bad will happen) such as an eviction, slap leak, collapsed sewer run, new roof, etc it could be challenging to see the positive of having a cash negative rental.
Make sure you are mentally prepared to supplement this property for potentially years through some difficult events.
good luck
Yeah I see what you’re saying . We have also an emergency fund for both homes for about 6 months. Our goal is to buy and hold benefit from appreciation etc and hopefully cash flow down the years to come when property is refinanced
What are you trying to accomplish by buying a new home? What are your longrun goals, and how does buying the second home and renting the first fit into that plan (or does it fit at all)? There isnt enough info here.
What are you trying to accomplish by buying a new home? What are your longrun goals, and how does buying the second home and renting the first fit into that plan (or does it fit at all)? There isnt enough info here.
Our long run goals are to hold property and benefit from appreciation in the future. And be an asset to hopefully pass down our son or help him when he’s college age or after he’s done
What are you trying to accomplish by buying a new home? What are your longrun goals, and how does buying the second home and renting the first fit into that plan (or does it fit at all)? There isnt enough info here.
Our long run goals are to hold property and benefit from appreciation in the future. And be an asset to hopefully pass down our son or help him when he’s college age or after he’s done
I would start by calculating the expected return on the old property using the known variables and estimates for the unknown variables, such as expected appreciation, capex/operating costs on the property, tax advantages, etc.
Once you have an idea of what the expected return looks like over whatever timeline youre anticipating, then you can compare that to alternative investments opportunities on the bases of both return and risk. In other words, if the specifics of your scenario indicate an expected return of X, then the question becomes: is X enough to justify the work, risk, etc, or can you get similar to X in something different with less work and risk. This will be the determinant of whether you need to sell the property or keep it.
Hard without all the details, but given your incomes and it sounds like you are still well within your means and not looking for cash flow and more of a long term appreciation play. If you are confident in the areas overall long term growth, I highly doubt you would regret this 20 years later!