Sell or keep as rental - Denver

[Dan Torluemke]

Hi all,

First post after having discovered this site about 6 months ago. Love the podcasts and looking forward to broadening my knowledge and hopefully building a decent portfolio over time. 

I have a question on whether I should buy or sell my current home in Denver (Clayton). The home was purchased in 2010 for about $200K (owe $165K) and would sell now for about $325-330K. My wife and I are building new construction (about $425K) and are undecided about what to do with the other home. Our mortgage is a bit under $1K and the rental income would be about $1800 (after paying PM). However, we will be taking a HELOC of about $55K to assist with the 20% down on the new place.

If we sell and net ~ $145-150K, we could use that and our savings (about $30K) to put the 20% down and have roughly $90-95K to begin looking for another rental (or 2?).  We would probably sit on the cash or potentially look at other markets as the Denver market is pretty crazy right now.

The only other debt we have is a student loan and we are able to save about $2-2.5K most months, which we plan to use towards properties in the future.

Thanks for any advice and can't wait to read more on the site!

Dan

[Dan Mackin]

Depending on your plan on acquiring new properties one big determining factor would be your DTI. With the new home at 425k it will definitely make an impact on your ratio compared to your current payment. Are you positive you can keep the current property while still qualifying for the new one?

Lots of people would pull even more than the 55k for the HELOC and utilize that extra to get the other rental properties. If you get a 90% LTV HELOC before you move then you would have 120K to play with. Take off 55K for your down payment and there is still 65K to use if needed. The number I was told on a HELOC was to not go above 75% usage. So on 120K don't use more than 90K. That still gives you 45K to play around with and find a property or 2.