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cubiczirconia

cubiczirconia

New member
So it's been three years that we moved into the current house, and SGIP recently lowered our payments significantly.
Savings have grown a little too, and it makes me wonder..

Is it a good idea to rent out the current house and move up?
Stay put and buy an investment property?

The house we live in is a 3 bed/2.5 bath decent size for the four of us, but as kids grow, there might be a need for another bedroom. Also, as parents age, we might need a house with a bedroom downstairs to accommodate them when they visit.

What would you do?

 
Cubic Zirconia said:
So it's been three years that we moved into the current house, and SGIP recently lowered our payments significantly.
Savings have grown a little too, and it makes me wonder..

Is it a good idea to rent out the current house and move up?
Stay put and buy an investment property?

The house we live in is a 3 bed/2.5 bath decent size for the four of us, but as kids grow, there might be a need for another bedroom. Also, as parents age, we might need a house with a bedroom downstairs to accommodate them when they visit.

What would you do?
Click to expand...
Reallly comes down to what you guys see as your future needs for a home.  Also, have you figured what the positive or negative cash flow would be if you rented out your home on a monthly basis?  Keep in mind that you will need at least 25% equity in your current home in order for the lender to give you an rental credit for it, otherwise you will need to qualify on the cost of both loans without the benefit of rental income.  I have a few previous buyers that are now looking to buy investment properties in South and North OC where homes are below rental parity (mainly because they are getting sick of getting less than 1% on their savings).
 
Cubic Zirconia said:
So it's been three years that we moved into the current house, and SGIP recently lowered our payments significantly.
Savings have grown a little too, and it makes me wonder..

Is it a good idea to rent out the current house and move up?
Stay put and buy an investment property?

The house we live in is a 3 bed/2.5 bath decent size for the four of us, but as kids grow, there might be a need for another bedroom. Also, as parents age, we might need a house with a bedroom downstairs to accommodate them when they visit.

What would you do?
Click to expand...

We were in a similar predicament a few years ago (2009) where our family was growing and our 3 bed, 3 bath was getting cramped.  Granted we lived in that house for about 10 years before we got to that point.
We were tossing around adding onto the house and staying put (we had a big enough yard to add on another bedroom and expand the kitchen), keeping the house as a rental and moving to a bigger house (squeeze on the finances if renter is a deadbeat) or selling the house and using the earnings to get a bigger house at a very comfortable mortgage payment.

We ended up selling the house and getting a bigger house (more than twice the sq. ft. of the previous house).  It ended up a good decision for us since we had an 'oops' a year later and now have grown our family even more than expected and use a majority of the extra space.  As part of the oops, having the comfortable mortgage helps us cover the additional daycare costs we were not expecting.

USC was a big part of us finding a house which fit all our important requirements in our 'move up' home.

By the way, SGIP refi'd us recently as well and now we have a couple extra Benji's in our pocket each month.

 
That's a hard question and depends on a few things.

1. Will moving to another home increase your monthly living expense noticeably?

2. Does it need to be a cash-flow property/real estate or could you invest in other things? (like an IHO-3CWG Investment Trust or the IHO-Donuts+ChineseFood+Basketball+Bollywood Studio ;P )

3. Will your current home be cash-flow positive if you rent it out?

4. What is the air-speed velocity of an unladen swallow?

Ooops... number 4 was meant for someone else.
 
I did work on cash flow based on conservative lease rates, and looks positive.
Equity is almost 25%, even with the conservative appraisal of the house.

Now the only dilemma is bigger house, or another property. The thing is, as of now the living space is pretty perfect. There isn't a wasted corner, but no one is demanding more. But as kids grow I do expect this to change a little.

As you know, Mr.Zirconia would prefer another property, but I am getting swayed on both sides :-)

 
irvinehomeowner said:
That's a hard question and depends on a few things.

1. Will moving to another home increase your monthly living expense noticeably?
>> Not by too much compared to the old mortgage..

2. Does it need to be a cash-flow property/real estate or could you invest in other things? (like an IHO-3CWG Investment Trust or the IHO-Donuts+ChineseFood+Basketball+Bollywood Studio ;P )
LOL! Bollywood queen defaulted already I guess :-)

3. Will your current home be cash-flow positive if you rent it out?
>> Yes.

4. What is the air-speed velocity of an unladen swallow?
>> Haha! I shall google ;-)

Ooops... number 4 was meant for someone else.
Click to expand...
 
Remember that being a landlord is not for everyone.  There are ups and there are downs, it really comes down to finding a good tenant.  If you have a good tenant, the property will manage itself....if not, well just add one more headache to the mix.  If the decision does not have to be made right away, taking a wait and see approach may be the best thing to do.  Besides, it's not like home prices are gonna start to skyrocket in the next 6-12 months.
 
I agree with USCTrojan, managing the property wisely, and screening your tenants well, is the key to making it work.  Also, would the return on renting out your primary justify the upfront expenses (initial vacancy, possible new paint/flooring) AND the sometimes hassle of dealing with tenant issues?  Hopefully, vacancy/maintenance are incorporated into your cashflow projection.  Also, would you buy your current house as an investment property?  If not, it might not make sense to keep it as one.

Would holding two properties be a stretch on your finances, especially if there was a loss of income? 

USCTrojanCPA said:
  Keep in mind that you will need at least 25% equity in your current home in order for the lender to give you an rental credit for it, otherwise you will need to qualify on the cost of both loans without the benefit of rental income.
Click to expand...

If qualifying for the cost of both loans pushes your back end DTI above 36%, FHA will still work with you as long as the purchase is for your primary, whereas if your next purchase is for an investment property, FHA wouldn't be an option.  Due to the high DTI ratios acceptable to FHA, counting the rental income probably wouldn't be an issue with getting qualified through them.
 
Another possibility is to move into the neighborhood you want to buy in and rent. Several things will happen: First, you'll get a feel for the area and see if it's a "right fit". Second, you'll start the landlord process, collecting rent, etc. If things don't fit your long term needs, you can always push your renters out and move back home. It's a tentative step, but one that will tell you immediately if you can handle being both a landlord and manage a high rent/mortgage payment.

My .02c

Soylent Green Is People
 
As a renter I love flushing cement down the toilet if my landlord does not address my concern. Several homes had some really serious sewage blockage beneath the post tension slab.
 
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