Beginner RealEstate Investment Questions - Should I Refi My House

[Steven Morris]

I have decided that I want to get into real estate investment, I currently net about 160K per year with my wife. I am trying to figure out what the best decision is for us getting started, rent out my current home and move or stick it out and invest with a partner. 

I bought my home back in 2014 for 139900$ at 4.5% interest with 140$ PMI. Total mortgage is 1180 and it needs a new roof, not urgent no leaks but it's ready for one. I estimate I can get this for under 5K as I know some business owners personally and should be able to get a good deal. We have paid down the house (extra payments) and currently owe 118000 roughly.

Fast forward my wife and I have new jobs about 45-60 minutes from our current residence. We are paying a total around 400$ per month in gas for both of us commuting. So we are looking for a house down near we work, and we have found some on the market we like between 250-300K.

Debt, we have roughly 27K in total debt including student loans. We met with financial advisor and we have outlined a plan to be completely debt free by September-October. After which if we follow our budget we should have roughly 4K a month to invest in rental properties. 

So with all of that out of the way, I ran the numbers and if I refinance my house I could get roughly 308 dollars of cash flow out of it a month and rent it out. I'm currently in an FHA loan, so I would refi to a conventional loan and then come September save an additional 3.5% on an FHA loan for my primary residence to be closer to work. Without the refi the cash flow would only be 98$. That's including vacancy, capex, repairs etc... in both figures. I ran the number on the calculator on bigger pockets here, and can add that info if needed.

The other option is to prepare my current house for sale for probably 15K I could sell it for 169K, and I would owe probably 116K by the time I sold it, I would have 53K in equity before I paid closing costs. I would then take that put it as a down payment on my primary residence, and then after all that is done begin saving and investing in rentals. I think this is not a great idea. But I want your opinion. 

The third option, I stay in my house an hour away from work and continue to pay 400 bucks in gas and wear and tear on the car. I estimate a nice house would be a mortgage of 1700-2100 for us. We bring in net 9400 a month. We have no kids, just a corgi a rabbit and cat. I have a potential partner who could contribute maybe 5K a month bringing our monthly investment potential to 9K as a best case scenario.

So if you were me and wanted to get into property investing but you needed a new house, how would you go about it. Say I find one for 250K tomorrow that we love that will only increase our monthly mortgage payment from 1180 to 1800, with no money down right now, im sunk in the water. I think I probably should wait until all of our debt is paid off but i'm not sure. I mean there is money in the bank but we're putting it all towards debt at the moment. But I think my wife would like to move sooner than later :D.

[Henri Meli]

Congratulations on your decision to get into Real Estate. Everyone's situation is different. Looking back at my start in real estate, my suggestion would be to think of an approach that would give you the most cash possible as fast as possible. You are going to need lots of cash for down payment for acquisition of properties. I don't see how moving from $135k to $300k primary home gives you more cash in your pocket. If anything, you should consider downgrading the expenses on your primary (only focus on what's absolutely necessary), so that you can save faster and put the money to work. You might need to house hack for some time as well just to build that war chest. Worst things for investors is to see deals and not have the money to jump on it . Once you have built enough experience with your own money, you can start leveraging other people's money. Just my 2cents ...