Sell Primary Home, Invest the Equity and Become a Renter?

[Matt Kvalheim]

Hello everyone, I wasn’t sure which forum topic would be best for this topic, so I picked this general topics forum.

I would like to get your feedback on my plan for freeing up funds to invest in Real Estate. My wife and I live in a home that we plan to sell in the next year which should provide us with $200K of funds to invest (that is conservative, hoping for closer to $250K). We would like to purchase multifamily units and use the cash flow to pay for our rent (ultimately, we would like to save and buy another home and have the multifamily units pay for the mortgage).

Basically, we would be selling our home and becoming renters again in order to hopefully have an investment that will pay for some or most of the rent expense. I do have some R/E investment experience, but not a lot. We have owned a couple 4-plexes in Boise, ID for the past 10 years, though I am not actively participating in the management (we have property managers as we live in CA). So what do you think? Is this a good idea financially?

The second part of my question is more short term. Since we are planning to sell our home next year, should I refinance my 30 year fixed mortgage to a 3 year arm in order to save about $600 per month on my mortgage payment until we sell? Again, do you think this is a good idea? My concern is that if we don't end up selling the home and rates go up by the time the ARM resets in 3 years.

Thanks everyone for your advice.