What would you do? Sell my primary home (house hack) for bigger projects?

Question

Sorry for the longer question/scenario. I bought my house in May 2020 in Raleigh market for $247,000 with 3% down and about $5,000 in closing costs. Have had roommates periodically and have probably spent less than $3,000 maintaining the house in the past three years. My loan balance is $224,000 and the house would sell for about $375,000, leaving me with around $140,000 after closing costs and paying buying agent commission. Not bad! If I keep my house, I'll just keep househacking.

I quit my job in July 2023 to grow my real estate agent business full time and right now I'm closing around 1 transaction per month, and it feels like I'll be getting to 2 transactions per month next year. I paid off $40,000 in student loans earlier this year which pretty much depleted my savings. I've got a 3 month runway saved up, but I feel like I'm constantly worried about having enough cushion which subconsciously impacts my business decisions.  Selling my house would allow me to put a little more to the side for living expenses (~$3,500/month), allow me to invest a little more money into my lead generation strategies for my business, and have  more gun powder for future projects. Am I crazy for considering selling? How would you mentally frame this?

Tiffany Alexy · Answer

Hey Ryan,

Your post caught my eye because I feel like I've been in this situation numerous times, lol. I wouldn't sell. As others have said, your 3% interest rate is an asset making you money. Can you rent out your office space? Just go bare bones for a year?

What's your car loan rate at? Just curious if you should be aggressively paying that down or just paying the minimums and using the delta toward living expenses/your business.

I would do a HELOC as well. If you have an investment portfolio (stocks, bonds, mutual funds etc), depending on the amount you could also look into a securities based loan. I have used both to fund cash flow needs, invest in more real estate etc. It acts similar to margin but it's not margin, so you can't buy more stocks with it (that's super risky anyway).

You are welcome to PM me! I'm an agent as well, and happy to brainstorm more ways to make it work.

Carl Millsap · Answer

@Ryan Overcash first Kudos for quitting the job to chase what you really want.

1. What is the cost difference in rent and your mortgage if you go back to having roommates at the house?

2. What can you do to lower the cost of living?

3. Can you get a HELOC to access some of the money w/o selling?

4. What lead gen. strategies can you do for free? Join a mastermind that has professionals that compliment RE selling . I was in a mastermind with an ADT rep, a mortgage broker, etc. We fed each other business w/o competing against each other.

Rents have increased significantly; I'm not a fan of taking short term money (selling for the lump sum) vs. the long term money (appreciation, rent payments). If you can lower your cost of living by taking in a roommate then I'd seriously consider / go back to that strategy.

What is the plan to get 2 transactions per month? What other areas can you generate revenue as an agent? Are you working with investors or first time home buyers?

Jonathan Small · Answer

@Ryan Overcash  I would not sell.  You are now self employeed and it will be difficult for you to get another loan.  Banks often want to see 2yr of income and industry history to give you a loan for a primary residence.  You will still be able to get investment loans since they often look at the deal more than how long you have been on your job.  I would consider doing a HELOC on your equity.

Andrew Freed · Answer

@Ryan Overcash - I'd first consider HELOCing it prior to getting rid of a loan at $247K with a 3% interest rate. That is an asset. Even if the $140k gets assessed a 10% interest rate, your overall blended rate is probably in the 5-6% range. You also have to keep in mind that transaction costs eat into the sales price / profits. You may be able to access $140K with a 100% HELOC but if you sell it, expect to lose 7-8% of the sales price to agent fees transaction costs etc. At least with the HELOC, you do not lose a good portion of your equity to transaction costs. HELOCs is how I grew my real estate empire.

Ryan Overcash · Answer

One thing I forgot to mention is I am a real estate agent so I would save my commission on the listing side. You bring up a good point regarding the HELOC and blended rate. I'm currently looking at a potential flip just south of Raleigh, NC in a smaller town, so those HELOC funds would help fund that deal. I'm in the traditional spot right now where I have some assets with my house and 401k, but I have no liquidity lol. Thanks!

Ryan Overcash · Answer

One idea I've had is to live in one of my spare bedrooms and rent out my master bedroom. This would essentially be me living in my office space. I can use the dining room as an office.

My car loan is at 1.99%, so that's hardly a priority to pay down. However, I would like to pay it off when I get the chance.

I'm going to explore my options for the HELOC tomorrow!

Ryan Overcash · Answer

1) My PITI is $1,350. Currently I don't have a roommate, but I do have one starting in February that will pay $1,000. I currently use another room in my house as an office and media space. If I rented out my place, it would rent for $2,100 and I could rent a room somewhere. The latter is my least preferred option.

2) I live pretty bare bones. Trying to pay off my car currently, and I will save $400/month when that happens. I have a demanding diet due to my training, so it's challenging to eat for less than $500/month to get my protein in. The new roommate is the biggest lever I have right now. Any extra money I have I try to put towards business activities.

3) I think this is the route I should go.

4) Most of my lead gen is SOI, social media, and video marketing. I'm going to start calling more multifamily owners and sending mailers, which will add a little cost. I am in some local business groups, and I think that will prove to be fruitful over time.

Based on lead flow currently I think I'll organically reach 2 transactions per month in 2024. I've always been a natural networker from grad school and past jobs. I prefer to build deep relationships with people rather than just look at it as a transactional business. I do work with many first time homebuyers which I love doing. I'm comfortable and enjoy working with investors, but I need to be careful about how I go about this. They seem to take the most time for the least amount of money. I won't say no to anything right now though.

What would you do? Sell my primary home (house hack) for bigger projects?

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