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Updated over 6 years ago, 08/20/2018

User Stats

10
Posts
2
Votes
Benjamin Sykes
  • Realtor
  • Jacksonville, FL
2
Votes |
10
Posts

Investing Advice for Moving Forward with Primary Residence

Benjamin Sykes
  • Realtor
  • Jacksonville, FL
Posted

I am a 26-year-old Realtor, my wife is 25, just graduated PA School and is now on the job hunt. Before she started school I had a stable job in marketing and with the market still rather low (in 2015) I felt like it would be a good time to try and buy a house. We got extremely lucky and found what might as well have been a foreclosure condition house (but with all major systems working). It took a little leap of faith on her part to trust the possibility of a good eventual outcome, but now we are sitting in a house that is a 2/1 - 1100 sq ft. that we purchased for 72,500 (at the time we used an FHA loan). That information along with the minimal improvements we have made the house would appraise for right around $121,000-124,000.

Here is where I am seeking advice because you can theorize this stuff all day. I want to know from someone who has actually been doing this, and has done it well to give me their advice if it was there primary residence at the moment what they would do?

There is an unfinished garage space that we are going to build out to add a third bedroom and second bathroom (the garage was closed in years ago…). should we refinance the house before we do that to keep the mortgage down when we add the additional bedroom? With that added space we could rent the home for between $1300-1600. Or should we add the space and refinance the house? My fear is that adding the additional bedroom would bring the appraisal up to around $180,000 and at that point you drop below the 1% method for this as a rental property with solid cash flow?

I guess what it boils down to is this…

1. Refi when my wife gets a stable job. Mortgage the house at the 120,000 range and add the additional space, then rent out. More cash flow, less cash money…

2. Add the additional bedroom, refinance around 170-180k… Less cash flow, more cash money. 

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