Should I sell or rent my home to start investing?

Question

Hello, everyone!

My name is Chris and I'm new to BP. I've been a big fan of BP for quite some time, reading and learning day by day. Recently, I've decided it's time to post my own questions and get great advice from you all to begin my real estate investing career. My first question, by the way, is a bit confusing, but it would really help me out to hear your thoughts. The way I see it, we have maybe two to three choices: fix up our home to rent it out, sell our home to purchase a duplex, or sell the home and perhaps purchase a mobile home. These choices should make more sense shortly.

A couple of years ago my wife and I inherited a home due to some unfortunate circumstances. My wife's mother lives with us. Even though it may not be ideal to factor my mother-in-law into the equation, it's impossible to do so and plan for a successful investing career. So, we've been here for a little over two years; however, because the home's maintenance was neglected before we got our hands on it, we've just about made up our mind to move. My wife and I have discussed alternatives to selling our home, but we're not sure what the best option might be.

If we sell our home, we'd move and live with family or rent while I finish my degree and we can identify a great deal on a duplex. In this situation, we would live in one half, and my mother-in-law would occupy the other. Unfortunately, she cannot afford to pay a decent amount in order for the right cashflow to come in.

Another option would be to sell our home and look for a mobile home to start off. Once I finish my degree, we can opt to rent out the mobile home to my mother-in-law. In this situation, because the price of a mobile home is affordable, we may be able to break even, or even generate a little cash flow, and put her into a good setup without jeopardizing anything.

Lastly, we could choose to fix up our home enough to make it attractive to renters. This would require quite aWe would have to live with family, of course, for a little while, but the fact of the matter is we don't really want to be here much longer. My mother-in-law would have to stay with some of her family for a while until we decided what we're going to do after that.

The fact of the matter is that our decision is complicated because we have to factor in my wife's mother. She is dedicated to helping her out due to her limited income. I have nothing against this, but at the same time we have to be realistic. We're doing well for ourselves and I'd like it to stay that way. Real estate investing is the way we'd like to go.

What do you all think? Please ask any questions you might have. Any and all suggestions and advice will be greatly appreciated.

Warmest regards,

Chris

Thomas S. · Answer

Keep in mind these are suggestions from a stranger that has no first hand knowledge of your situation.

Ten people could easily provide you with ten different approaches to these life decisions all of which in theory may work but in practice may not meet your personal life needs.

Christopher Sarter-Soto · Answer

Thank you for clearing that up for me. There are definitely a lot of things to take into consideration and your suggestion appears to make good sense.

Thomas S. · Answer

Owning a home has far more costs than insurance which is why renting out a single family rarely cash flows. Up keep and other expenses, which you have deferred on your home, are a major part.

As a renter you would obviously not gain equity in the property you are renting but you would grow equity in the income property you invest in along with the income you receive from your renters.

Since you can not put food on the table from equity being a renter yourself will put you farther ahead financially each month than living in a home you own.

Home ownership is expensive which is why renters exist.

Christopher Sarter-Soto · Answer

Greg,

Could you explain a little more how renting is more cost effective than owning? Doesn't owning a property create equity as well, while renting doesn't? Additionally, our current payment, including insurance, is less than $500/month.

Thanks for your input.

Thomas S. · Answer

Renting out a single family is usually not going to produce cash flow and the cost to renovate is probably not going to pay off but a realtor would need to advise you on that.

I would sell and rent a place for the three of you that you can afford with your present income. Renting is far more cost effective than owning.

Take the profit from the home and invest in a multiplex that will cash flow. You get both income and equity growth.

Christopher Sarter-Soto · Answer

45k/year at the moment.

Thomas S. · Answer

Income?

Christopher Sarter-Soto · Answer

I realize it was too general a wuestion without the details, so here goes nothing.

Stephen, we currently owe a little under 55k on the home and it's current value is about 115-120k as is. It's hard for me to estimate future worth after rehab as I'm very new to this. The repairs needed would be a new roof, new floors, bathroom remodel, kitchen remodel, sliding glass door replacement and other door, attic insulation and window updates. The home was built in 1964, and slowly we've been doing some things to it. Again, we basically wanted to move so not a whole lot has been done.

Greg, currently we have around 20k saved up for repairs or moving, move-in, costs. Above are some of the details needed, but let me know what else you might need.

Thank you both for replying and I hope that gives you a bit more of an idea. Other resources available to us I suppose could be some family who can do a lot of this work with us over the Spring and into the Summer.

-Chris

Thomas S. · Answer

It does not sound like financially you have very much. More details are required as to your net worth to be able to give any advice. Income, equity in home, extent of repairs required etc.

Should I sell or rent my home to start investing?

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