Financial Windfall - best way to spend it wisely in Baltimore

[Tim Youse]

I've received a windfall and thanks to that I have a little over 6 figures available to me to spend on either a new home for my family now, or buy 1 or more income properties nearby and THEN buy a new home...

My current house is *just* underwater, so if I sold it, I'd lose several thousand dollars, and if I rent it, I might make $100-$300 more then the mortgage, and that's no guarantee. (bought house for $158k in 2006, I owe $134k, with mortgage of $1340/mo) Comps in my area go for $160k, but my lack of central air and no new kitchen drops that number back to the $125K-$135K. If I refi, I can get my mortgage to $950, but homes in my area (Baltimore City) rent for $800 to $1400 at most.

So with that in mind, I set a modest budget on a new house at $325k max. With 20% down that's $65k + closing, which still leaves me with about $45k in cash, not including investments, 401k, etc. Mortgage with tax, ins, etc would be around $1500.

However, if I do that, AND keep my house to rent, it doesn't leave me a comfortable margin IMO to buy an income property - at least not in an area I'd want to invest in.

Since I've never bought an income property, it's a little daunting. I did some research in various areas and I've found turnkey homes for sale in decent areas in Baltimore County for around $70k that could rent for $1200 +/- $200, for a cash flow of around $1k/mo.

So fellow BP members lend me your advice! Thank you!

[Josh C.]

I'll throw my hat in the ring. I'm not in you area, but it doesn't make sense that you could buy something for 70k and rent it out for 1200, while you place worth 130 has such a board range of rent. Make sure the turn key people aren't blowing smoke. Personally I would not sell my house in your position and try to rent it after a refi. Also, just because you have 100k doesn't mean a 325k house is modest. Has much more to do with your total income and total debt. I'd rather see you buy a nice duplex in good area (and live in) where one side can pay most of your mortgage while you get your feet wet landlording. That's what I'd personally do. I'd do whatever I had to do to not take on even more consumer debt.

Good luck