Sell home or turn into rental in Austin, TX area?

[Heather Meyer]

My husband and I are ready to get into real estate investing, we are also new empty nesters, want to downsize, and have a good deal of equity in our home.  We live in Cedar Park, TX (Austin Area), our home is 3800 sq ft and we have about $420K+ equity currently in the house.  We have talked about selling the house and using the profit to begin buying rental properties.  Now we are also considering keeping the house and turning it into our first rental property.  Looking for sound advice.  If we turn it into a rental, how can we still utilize the equity in our home to not only buy our next primary residence but also buy at least one more rental property.  

[Victor Steffen]

@Heather Meyer

100% Keep it. 3800 feet in Cedar park will command a premium . Curious how many beds? If you're in a HOA and there are not any restrictions against unrelated occupants then You could be sitting on an awesome rent by the room house. Worse case scenario you lease it to a single family for 2500/month and have them handle all maintenance and utilities (minus larger capital items of course). Best case you pull $750 per bedroom in this 5-6 bedroom house. Both seem like pretty okay options.

Refinance, pull out ~300k. Put 20% down on your next primary (350k purchase price.. remember we’re downsizing ;) and 25-30% down on the investment property (similar purchase price though closer to town than cedar park). 300k cash cusion gives you the flexibility to be aggressive and put in the types of offers that are getting accepted in the Austin/ Leander/ cedar park areas.

I’m a fan of using debt in growth markets and low interest rate environments. Should be able to retain the current house, plus land a smaller primary, plus an investment property.

Last caveat- no idea if you’re targeting cash flow or appreciation or if you even want to stay in central TX or invest out of state. Maybe a little clarity on those items can help inform future commenters.

Good luck!