Remodel primary residence or buy rental..$50k Question

[Fiora P.]

Hi everyone,

I’m new here, right now just reading and learning. My husband and I are very interested in starting out, but at the same time, we want or have to do ( Shocking right!!:-). Our biggest dilemma right now is if we should use money for home improvements on our main residence or buy a rental property. Let’s say we have $50k to spend…

Would what you do?

Here’s some background…

We bought our house in 2008, a single home in Lower Bucks County, Pennsylvania. The house is perfectly livable, but we want to add some living space by building an extension to our kitchen area and remodel the kitchen. This would increase the value of the house too, but that's not very relevant because we are looking to live here for a very long time.  We haven’t gotten any estimates yet, but we are thinking $50k might be enough ( or not..will see..). 

We are looking at RE investing as a retirement investment tool, rather than monthly income (of course, only if there is cash flow, but we are ok with minimal cash flow). The only way a rental is going to work for us is with a turnkey property. We don't have the time, the connections or the knowledge to do any flips. Now, from what I've read around, it doesn't seem like you can do much with $50K in Philadelphia area, or at least in NE Philadelphia and surrounding areas, therefore we are open to C neighborhoods too. We have excellent credit, so financing through a bank would be possible (as scary as a second mortgage sounds right now). We have enough income from our W2 jobs to cover second mortgage if property is vacant.

We don’t have any debt expect our mortgage on our house. We paid $32k in student and car loans last year. We also have around 6 months of expenses in our emergency fund. Right now, we can very easily save $25-$30k a year from our W2 jobs. So if we choose one option, the other one can be done in couple of years...what would you do?

Thank you so much!