sell current home and rent in order to get started?

Question

greetings all!

(edited to move to new member intro)

MY QUESTION is should we sell our current house, knowing that we may have to rent for a little while so we can act quickly when we find an opportunity? We may get lucky and not have to rent. We could rent probably for 6 months and keep our sanity.

We currently have a 15yr mortgage with 10 years left @ 5.5% as well as a small second HE loan (6 years left @ 5.5%) and HE loc... I think at 8%? All together adds up to $84K. We also have one consolidation loan (stupid) (about 22K) which is a higher rate... like 13% or something that we'd like to pay off with the equity from this house (worth $125-135K). After paying realtor fees, we'd only have about 7-17K to work with.

All together payments = $1592
We could rent a 2BR for a short time for $700-750/mo
Our goal would be to pay about $95-$110K for a house worth $140-160K. But it would have to be close enough to livable condition that we could move into it after minor repairs, painting etc. within a month or so.

We know we don't want to stay in this house forever, which is why we're considering a move now (otherwise we'd just pay off the stupid consolidation loan with a HE loan at a much lower interest rate).

Adding on to this house isn't really an option b/c then we'd be the most expensive home in our little area.

We may have to live through 1-2 moves so we can leap frog into our dream home. We'd love to be able to do this eventually without moving, but I don't think we can do that at the moment.

Unless we refinance the whole shebang for a longer term (i.e. much lower payments) and rent this one out? How does the bank see rentals? I'm not sure we'd have enough for 2 mortgages, even if they're lower b/c of longer terms.

We have 2 children (6 and 3) and a dog, so it isn't just us moving.

WOULD YOU DO IT?

Thank you for getting this far... Any ideas or advice you may have would be greatly appreciated.

Tom Sylvester · Answer

I would say keep your current house rather than sell it to rent.  You have a low rate and a short term.  After selling, you wouldn't really be left with much.  And do you really want to move your family out of your house to live in an apartment?

My only recommendation for seeling would be if you were going to buy a duplex.  This would be much better than renting.  Your tenants would pay part or all of your mortgage, plus you would get loan paydown and appreciation.  Since your mortgage payment would drop significantly, you could save for your next home or more investing.  then when you buy another house, you will have a duplex that you can rent out both sides off.

Tracy Montarti · Answer

slimmatic - thank you for the advice! I really appreciate it. 
I was reading through posts here in the meantime and was about to come back here and say that buying a duplex might be a better option. I even looked at the regular real estate website just to see what was available full price (would work hard to find a better deal though).

Our landlords before we bought this house were doing that very thing... they bought and rehabbed a duplex and then eventually rented out both sides and bought a house.

I remember thinking 'we should have done that' after we bought this house, and now it wasn't the very first thing to come to mind... why I don't know.

A nice thing about that option too is that we would have control over who our neighbors are since we'd own it.

anyway, thanks again for your input!