House Hacking Help

[Ryan Chase]

My name is Ryan, and I just joined BP this week. I want to get into REI and I'm looking for some help figuring out whether/how to pull off a house hack.

• We currently own a 3bd/2ba split level, appraised around $168K two years ago. 
• We have a 15 yr mortgage at 2.75% and owe $118K. P&I payment is $947, plus $282 to escrow each month ($1229 total). 
• We have $30K cash available and two incomes. (But some of that cash is in our "emergency fund", so I don't think we would want to put all of it toward our next home.)

Here's what makes our situation challenging: We have twin sons (3 yrs old) with a severe disability. They have trachs, ventilators, and feeding tubes, and require 24/7 nursing care. A split level is terrible for wheelchairs, so we are looking to build a custom home that accommodates the boys.

If we didn't need to move ourselves, I would start looking for rental property. But our immediate need is a home that works for us. So I'm trying to learn what I need to do to keep our current home and turn it into a rental. Similar properties in our neighborhood rent for $1425, but conservatively, the range is $1100-1350.

My question: How do I leverage our current house? I've been reading about HELOCs and Refinancing, but I'm not sure how to calculate those potential payments so I can figure out cash flow. I want to talk to some local lenders, but I'm not even sure what questions I should be asking. Is it even possible to use a HELOC or cash-out toward a down payment on our next home?

Thanks for sharing your time and knowledge!

[Eric Black]

@Ryan Chase  There are a few reasons selling with seller financing can be a better option.

1. You save 5-6% in real estate agent commissions. 6% on a $168,000 sale is $10,080. This will then give you more money to have toward your next down payment.

2. Depending on how the deal is structured, how much of a down payment you get and who you sell to you can often receive a monthly payment from the new buyer that is more than what your current payment is, giving you another monthly income stream. It's like a rental but you're not responsible for repairs! If you sell to someone who may not be able to get traditional financing elsewhere due to a foreclosure or short sale, but who otherwise has very good credit then you can often sell the house for slightly over what the market is bearing. 

Since you have lived in the house for at least 2 years you don't have to worry about capital gains taxes.

If it's not something you're comfortable with then I would look at Destiny's suggestion of refinancing with a 30-year fixed to see what that does to your payment.