Rental vs Cash for new primary residence and business

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Rental vs Cash for new primary residence and business

Jacob Chance Cunningham
Member since 2019 · 2 posts · 1 vote

I bought my first house in 2019 and has appreciated $150,000. My family is growing and my wife wants to move into a bigger, new construction, house. I want to keep my current home as a rental but my wife wants to sell so we can put a larger down payment on the new home plus we are in the process of starting a new business in the next 2 years. My opinions are 1) keep my current home as a rental, I can buy the new home with a VA loan put 10% down to keep my mortgage just barely below 28% of our monthly income but now most of our savings are gone or 2) sell my home, buy new with VA loan put 20% down but now with my current saves and what would be left over after the sale I would have over 100k to help fund our business. I would now have to start my real estate portfolio over again 3) suggestions I haven't thought. Please let me know what y'all think.

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Gurbeer Sangha
Realtor · Fresno, CA · Member since 2022 · 58 posts · 41 votes
3y

I wouldn't sell the home. If anything, buy your second, larger home and get a HELOC on your current residence with your newly added equity. This way you can tap into your equity for other projects without having to sell any real estate.

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  • Gurbeer Sangha
    Realtor · Fresno, CA · Member since 2022 · 58 posts · 41 votes
    3y

    I wouldn't sell the home. If anything, buy your second, larger home and get a HELOC on your current residence with your newly added equity. This way you can tap into your equity for other projects without having to sell any real estate.

    1Reply
  • Rene G.
    Real Estate Coach · LandlordSkool.com · Member since 2017 · 113 posts · 90 votes
    3y

    Never sell!

    Option 3 stay... Why not stay longer and save up a bigger downpayment while you see what happens to real estate prices, rates, and inflation? If you're not in a rush, and you can wait, then you'd be able to focus most of your effort on bootstrapping your new business.

    In an effort to help persuade your wife to toughing it out longer, try explaining that if yall stick to option three, you could potentially get a bigger/better new construction house later *and best part of all* another horizontal income stream (i.e. rental income). Not sure what would be more appealing to her, but maybe she'll be happy to know yall could use that exact income to either supplement/offset your new mortgage, or yall could be working towards leaving an inheritance to your kids... you know Proverbs 13:22 leaving an inheritance to your children's children.

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    3y
    Quote from @Jacob Chance Cunningham:

    I know a lot of younger families make the mistake of upgrading to a big, fancy house they don't need. We did it. Bought a house on the upper range on several acres that required extra money and labor to maintain, about 1/3 of the house was hardly used, yadda-yadda. Four years later we moved to a more reasonable home in a location that was better for us and our kids, and we couldn't be happier.

    I would keep the current home as a rental. I would buy something affordable that meets your needs now and in the future, focused on neighborhood more than "new" and "fancy" that will likely be torn up by your kids anyway. Instead of stretching yourself thin to show off or stroke your ego, focus on building wealth so you can live like nobody else later on, put the kids through college or a trade school, travel the world, etc.

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  • Eliott Elias
    Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
    3y

    Keep the rental and put the lowest down on the next home. 

    0Reply
  • Jacob Chance Cunningham
    OP
    Member since 2019 · 2 posts · 1 vote
    3y

    All great advice, thank you! So my wife would like our next house to be our last move at least until our kids go off to college. She is nervous about our mortgage payment being to expensive. If we keep our current house as a rental our mortgage will be above the recommended 28% of our monthly income. If we sell it and I put 20% down our mortgage payment will be right at 28%. I know the easy answer is to not move yet but 1) she really wants to sell this house and move into the new construction home 2) wants to be in our 20 year house before I start my rental portfolio. Any other suggestions?

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    3y

    If you explain why selling is a bad idea (I assume you also mentioned the $40-$50k it’s going to cost to sell and move.) It sounds like you have to sacrifice her current happiness or your family’s financial future and stability. As they say, “pick one”.  

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