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  1. #1
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    Question Rental property investment?

    So, I just bought a new house 2.5hrs away from current home and will be moving. I borrowed the funds from my parents to get settled in. But it got me thinking… when I start a new mortgage to pay my parents back, I was going to use the equity from the old house as the down payment for the new house and pay off all other debt… BUT, since my current house is financed at 3.5% and currently owe $135k (estimated value approximately $200k), I was thinking about somehow making a rental property out of it due to it being locked in at a low 20 yr fixed rate (18years left).
    selling the current house, paying off debt, having down payment money and paying parents back is the easy button. Keeping the property and turning it to an investment property would certainly make more $$ but financially run me thin.

    id like some input (pros/cons) on this.
    thanks,
    David Geske
    Boatless Family Man


  2. Electrical/Wiring/Trolling Motors Moderator CatFan's Avatar
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    #2
    Trying to maintain a rental property 2.5 hours from where you live will be a challenge. You’ll likely need to hire someone to manage it for you which could change the financials.
    If you have integrity, nothing else matters. If you don't have integrity,
    nothing else matters.​

  3. Member
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    #3
    Quote Originally Posted by CatFan View Post
    Trying to maintain a rental property 2.5 hours from where you live will be a challenge. You’ll likely need to hire someone to manage it for you which could change the financials.
    My job has me running around the tri-state area so 2.5 hrs drive is really nothing for me. (If that changes your answer).
    David Geske
    Boatless Family Man


  4. Member
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    #4
    Depends on the landlord/tenant laws in your state. Can you evict quickly?
    Here in Florida, it's a civil matter and usually your tied up several months.

  5. Member
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    #5
    How old are you?
    Married or Single?
    How secure is your job?

    Current gross monthly/annual income?
    Current gross monthly/annual fixed expenses?
    What is your Federal and State tax rate/bracket?

    Are you currently maxing out all available retirement accounts? (401k, IRA, HSA if available to you)?

    How much total debt outside of mortgages (consumer debt) do you have to pay off and what is your current timetable to pay it off?

    Did you borrow the full amount from your parents for the new house or just the downpayment? Wasn't certain if the "new mortgage" is to a bank or to your parents.
    What is the monthly mortgage payment on the original/potential rental house and what is current fair market rent for it's location?

    Thanks for clarifying the total financial picture in order to get more pointed advice on your decision.

  6. idbefishing
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    #6
    Take it from someone that has done something similar, don't do it, not worth it.

    Back in 2012, I got a new job 1.5 hrs away so I had to move. Selling the house would mean taking a loss because the housing market was in the shitter at the time. The first tenant I got was not good. The second tenant was awesome and because the rent was just enough to pay the mortgage and maintenance costs. This tenant stayed for 8 yrs and took care of the house. Managing the property from a distance was a lot of hassles. The property tax on it went up, insurance went up because it turned into a commercial property. My tax filing got more complicated. Paying for 2 mortgages while in between tenants, and all the other payments associated with having a family was very, very stressful. The second tenant moved out in 2020 and I sold the house after quite a bit of overhauling.

  7. Member
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    #7
    Your first idea of using the equity as a down payment and paying off all other debt is the best way to go in my opinion.

  8. Member
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    #8
    Quote Originally Posted by idbefishing View Post
    Take it from someone that has done something similar, don't do it, not worth it.

    Back in 2012, I got a new job 1.5 hrs away so I had to move. Selling the house would mean taking a loss because the housing market was in the shitter at the time. The first tenant I got was not good. The second tenant was awesome and because the rent was just enough to pay the mortgage and maintenance costs. This tenant stayed for 8 yrs and took care of the house. Managing the property from a distance was a lot of hassles. The property tax on it went up, insurance went up because it turned into a commercial property. My tax filing got more complicated. Paying for 2 mortgages while in between tenants, and all the other payments associated with having a family was very, very stressful. The second tenant moved out in 2020 and I sold the house after quite a bit of overhauling.
    Quote Originally Posted by RyanJ View Post
    Your first idea of using the equity as a down payment and paying off all other debt is the best way to go in my opinion.
    I think I talked myself into the option of selling. Sometimes you just gotta ask though.
    I was just trying to think of ways to better myself.
    David Geske
    Boatless Family Man


  9. Member
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    #9
    Quote Originally Posted by GetReel View Post
    I was just trying to think of ways to better myself.
    Eliminate debt. Don't do it again except for your primary residence. Make the mortgage go away when possible.
    Max out your retirement savings, spending comes from what's remaining. HSA, 401k, IRA in that particular order.
    Be sure to take advantage of Roth conversions. Especially if you may retire early, it will make a huge difference.

    Leverage is for removing nails from old dry wood. Debt elimination is key. Buy with cash, be frugal, be consistent.

  10. Member
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    #10
    Quote Originally Posted by TampaJim View Post
    Eliminate debt. Don't do it again except for your primary residence. Make the mortgage go away when possible.
    Max out your retirement savings, spending comes from what's remaining. HSA, 401k, IRA in that particular order.
    Be sure to take advantage of Roth conversions. Especially if you may retire early, it will make a huge difference.

    Leverage is for removing nails from old dry wood. Debt elimination is key. Buy with cash, be frugal, be consistent.
    ALL OF THIS!!! Well put TampaJim!

    "I think I talked myself into the option of selling. Sometimes you just gotta ask though.
    I was just trying to think of ways to better myself."

    Going through the thought process and seeking counsel from others is a powerful exercise! Good for you in working through this line of thinking. Awesome to see the fishing community responding here with their experience and thoughts in order to provide advice to your question!

  11. Member
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    #11
    You may be able to pick up some bargain real estate from Blackstone or Starwood if they have to sell to meet redemptions