To Sell or to cash out refi

[Emon Thompson]

I am a homeowner looking to invest in real estate over the next 2-to 3 years. My home has appreciated about 160k from the high market but my problem is I have about 98K in Vehicle and consumer CC debt. If I sell the house I should about break even and have 0 debt but no house. If I cash out refi rolling the debt into the house my monthly payment will go up around $1100 but I will be saving money from not paying for debt and the car payments every month equaling a $1719 savings every month and my credit score will increase allowing me to purchase future properties. My question is based on the speculation that I can lower my interest rate in the future, lowering the payment amount. I plan to hold this property in the future and not sell it if I was to refi. Using it as my first rental property when I eventually move out. With everything going on I'm unsure whether I should sell, save, and start from scratch or go through refi the house and rent.

[Ryan Howell]

@Emon Thompson - I would sell...The reason has less to do with the ROI on that money and more to do with habits and risk. Consumer debt will destroy any wealth building benefits real estate can provide, so until you change the habits that drove up the consumer debt, you will not be able to achieve financial independence. If I were in your shoes, I would probably sell the house, maybe sell the car and get a cheaper one, pay off all the consumer debt. Now your DTI is in a good position for another mortgage....then go buy something you can house hack, such as a duplex. Now your monthly expenses are significantly lower and you still own a house AND your financial risk is about as low as it can get. House hacking and driving an older/cheaper vehicle will also help to break the consumer debt habits as you're significantly altering your lifestyle. Being in a position of financial strength, you can start to take calculated investment risks to grow your portfolio that would be much more terrifying and risky when you have no flexibility in your budget and a lot of bad debt hanging over your head. I think that will position you really well to be successful.