Question on Rental Strategy

[Saurin Pandya]

Hi All,

I bought a second home and looking to convert the current home into a rental property. My current home is on 15 years mortgage and I was thinking if it would be wise to refinance it to 30 years and get mortgage payment down so that I can generate a good cash flow with rental. If I keep at 15 years then the monthly rent may just = current mortgage, barely generating any cash flow/income. Initially, I didn’t care too much about the income as I was more focused on equity and be able fully pay off the property in considerably short duration. However, I am reconsidering if it would be a smart investment strategy? I understand the interest rate would go up at 30 years but it’s still not hurting me since the rents would cover it (and on top generate good monthly income). I am looking for a general opinion on this as I understand ultimately it all depends on my goals, financial stability, market, etc.

Any thoughts?

Thanks,

Saurin.

[Nathan Gesner]

Your current home probably isn't a good rental and you're probably calculating "cash flow" incorrectly.

Check out THIS ARTICLE from Brandon Turner.

We're in a peak market. This may be an appropriate time to sell your first home, cash out the equity, and look for an investment that has good cash flow and is better suited for handling a recession. If you keep the current home and it's not producing a large enough return, a recession could kill it.