Need advice on a second property

[Thomas T.]

Hello:

I think i got a start in REI, and I like to seek more advice on how to proceed to the next property.

I got my first property as my primary residence one and half year ago. I bought it for 340K with 5% down conventional loan, (owner paid 10K in closing cost). And I spent about 30K in upgrade. As the market as it is today, looking at the comparable in my neighborhood I can probably sell my house for 410-420K. The principle is around 316K.

I contacted my lender, they said based on the debt (car, student loans and current house), I can get approved for a second property of 350K. Or renting the current house out (for 6 month) and count it can be counted as my second income so that I can afford the next property for 600K

Here's two scenarios that I am thinking of doing:

1. Turn the current house into a rental, move somewhere temporally, and buy a second property for a higher price.

2. Buy a second house for 350K and rent it out and start from there?

I'm leaning toward the first option because I want to move to a higher price home for a bigger space for me and my family. However my long term real estate goal is to buy multiple single family home => hold/rent => sell them for higher price.

All advice/opinion/comment are welcome.

Thanks

Best Regard,

Tom

[Mark Ferguson]

Just because you can qualify for a bigger house doesn't mean you an afford it. Especially if you want to be investing you need to save up money. I want my mortgage payment 10% of income or less, not the 28% or higher lenders will allow.