How to allocate my equity to help pay down debt and still invest

[Randy Bayo]

I bought a house back in November 2020 for $378,000 in the Sacramento area. 1300 sqft 4 bedrooms and 2 baths. I rent out each of the room for $775/mon and the master bedrm for 850/mon. Total rent income is $3,175/mon. Mortgage is $2,170/mon.

I am running into financial problems. I can’t afford my monthly debt and I am trying to figure out if selling the rental house is worth it.

It is currently valued at $468,000.

My monthly expenses are:

Mortgage (home): $1,180

Student loan: $450 (owe 65k)

Personal loan: $330 (owe 10k)

Car loan: $250 (owe 10k)

Car insurance: $150

Cell phone: $100

Groceries/gas: $500

Total expenses: $2,960

I have 2 credit cards that are maxed out:

Chase: $1,500

BofA: $6,000

Some back ground. I am a 34 year old married man. Make 60k/yr. Take home after taxes is $3,200/mon.

My wife is expecting our first baby this December. She’s a Spa Owner and makes about 60k/yr. Business break-even. Been open for 2.5yrs.

My thought is to sell the house and use the equity to pay off the personal and car loans. Total 20k. As well as to pay off both credit cards. Total 7.5k. And use the rest of the equity to buy another rental property. I honestly don’t know what I am doing which is why I am reaching out to this forum looking for advice.

Any help and/or insights would be tremendously appreciated.

[Chris Seveney]

@Randy Bayo

Why would you buy another rental? Your current rental cash flows $1,000 month and you cannot afford your bills. Pay off what you can and keep savings especially with having a baby.

With $129k income not sure about your location but it seems like you have a spending problem not an income problem. So learn to stop spending as a baby is EXPENSIVE plus if your wife is self employed she will I assume have lower income for taking care of your child

Last thing you should be doing is buying more real estate