Buying a Rental Property (utilize cash/equity or loan?)

[Shahrzad Amin]

Hi All,

I have some cash (around 80k) on hand (on top of my emergency funds) that I am considering using to buy a rental property to generate some cash flow. I own the condo which I am living in currently with a ~100k mortgage with a 4% rate. I am trying to figure out the smartest investment move. A few things to consider:

a) I have built around 180-200k equity in my condo

b) the HOA fees are somewhat high in this community, ~400/month.

c) This condo is in an area with growth potential as a new project (The Dallas Midtown project) is going to start soon (it has been getting delayed for quite a few years so not completely confident in it actually starting).

d) I would like to move out of this condo in the next 6 months (potentially out of state)

So I am considering these options and would love some feedback:

1) Sell the condo, take the equity 150-200k, add my 80-100K on top and buy a SFH cash and rent it out, and personally live in a smaller apartment (rent would be similar to what I am paying on my mortgage now) so technically whatever I make from the rental property would be my cash flow .

2) Keep the condo and rent it out, cash flow will not be huge, maybe $400-$500 after expenses (due to high HOA fees), and take out another mortgage with the current high interest rates, use the 80k as down payment for a second rental property (unsure what the numbers would be given the mortgage payment, probably not a whole lot) and rent an apt to live in.

3) Any other ideas/hacks I am not thinking about? Take a loan from 401k? buy a bigger property as my primary residence, live for 6 months and then rent it out?