Is it worth selling primary residence for capital towards REI

[Tyler Richmond]

I apologize if this topic has been covered already. I have not seen anything that quite covers my questions entirely.

My wife and I currently own a home in San Diego with a 30yr fixed rate mortgage at 2.75%. Like many others my equity has increased significantly over the past few years. Given the fact that this is one of the most desirable cities to live in, I never thought it would be wise to sell, especially with our low interest rate and mortgage payment in comparison to rent cost. On the other hand, it seems as though cashing out the sizeable amount of equity we have would give us significant capital to start pursuing real estate investing in a less expensive market. I have run the numbers and if we were to rent our house long term, we could be cash flowing roughly 1 to 1.5k/month with it being managed. Not bad, but that's all our eggs in one basket here.

We have wanted to leave California for some time now, so the thought is we could sell now and capitalize on the last little stretch of these inflated prices. If we keep this house and rent it out, I don't see how we would be able to access the equity we have accumulated and use it to start making more money. I currently own my own restaurant that unfortunately opened right as the pandemic hit. As you can imagine it has been a struggle to take home much, so from a DTI perspective we would not qualify for a HELOC anytime soon. A cash out refi makes no sense given the difference in today's rates either. My wife may get a job offer out of state, in which we would relocate wherever that is, but I still do not think our DTI would allow us to access the majority of the equity in our place.

The final piece to this puzzle is that our home sits on a flat usable 1/3 acre. With the new laws passed in CA we would eventually be able to put and ADU on our property and also potentially convert our two-car garage into a JADU to up that cash flow significantly. Obviously, cost would be a factor, we do not have the funds to do this right now, but in time it is an option.

It seems like if we cashed out and moved to a market we like and had no jobs, then we could still qualify for a property with a DSCR loan if the number made sense. The other thought is purchasing something all cash relatively cheap that needs some work and doing a BRRRR. Ideally, we would want to house hack right out of the gate with a duplex or triplex, but again, we won't have the funds to do this unless we sold our house.

I hope this makes sense. Any help would be greatly appreciated. Our biggest fear is that once we sell this place it's obviously gone forever. Given it is in San Diego and we have such a killer interest rate, I'd hate to look back and think that this was a short-term bad decision. I also am ready to dive fully into REI and having the capital to start purchasing as many cash flowing properties as I can seems to make more sense than holding onto just one property.

Cheers,

Tyler