Quick back story: My wife and I bought a home last April when we relocated for my job. Since the home purchase, she has doubled her income and mine has gone up over 300%. As a result, we are now in a position to buy a slightly nicer house and keep our current one as an investment if it makes sense.
Some of the numbers:
Purchase - $232,500 Still owe - $204,000 Payment - $1,563 (mortgage, taxes, insurance)
At the time, we only made about $90,000 combined, but we now make about $260,000. We are looking at purchasing a new home in the neighborhood of $320-350,000 and keeping our house as a rental. We live in a hot market where home values are going up 10-15% per year, and rents are rising rapidly. Right now, though, we are looking at getting about $1,500/month for the rent on the house, so we would be out of pocket $60 or so per month plus repairs and vacancy. I have no doubt that we could easily cover both mortgages for a while if for some reason we ended up with a vacancy, and cover any repairs that are needed on the house as a result of renting. Within 2-3 years I’d expect the house to cash flow positively with no updates, or we could probably get it to cash flow positively now with a little work, but we are lazy.
My question is simply: is it generally a good to rent a home where you’re getting negative cash flow? We are still earning on price appreciation and the mortgage paydown is like $300/month so if I’m thinking of this properly, we will be coming out ahead now and will have a great cash flow within a few years when rents are up. We are 24 years old and don’t plan to move any time soon so we think it’s an excellent idea but maybe I’m missing something? Thoughts?
Submitted September 17, 2018 at 09:15AM by Amartin22 https://ift.tt/2pfHF5g
