Keep 3.375% 17yr mortgage rate or tap $300k in equity for RE investing?

[Erik Johnson]

Hi,

I am living in my primary residence which was a house hack we used for a while with a mother in law suite. We've refinanced the home and got down to a 3.375% interest rate for 20 years (3 years ago). I want to get into Real Estate Investing and we have the funds to move into a nicer neighborhood for our young kids and keep this one without selling our current residence. There is the potential for appreciate as the area has gotten much nicer and a large hospital is getting built less than 5 miles away. We love the area, but need something a little bigger. This home has roughly $300+ in equity in it, should we be moving on from this home and buying more smaller properties to maximize our portfolio performance.. I worry about giving up this interest rate...

Any thoughts or considerations would be helpful.

Thanks!

[Jaron Walling]

@Erik Johnson Just because you have the funds doesn't mean you need to deploy them. We're in a similar situation and have decided to sell our current primary. The reason?... avoiding taxes, bought distressed a few years ago, and over renovated. You keep saying "we". If you're married you can exclude up $500k in taxes from the government (2/5 year exclusion rule). Unless the current primary cash-flows or you know the market well enough to justify holding (hospitals are one sign of economic growth) selling usually makes more sense. I'd be running the numbers and looking at the ROI.

"We have the funds to move into a nicer neighborhood" - if it's a nicer neighborhood the living expenses are going up. The markets have heated up again and rates have dipped. Good chance you'll have to offer over ask to get what you want. Other than distressed or low quality C-/D class stuff the demand is sky high. Personally it's been hard to justify the additional expense and losing a low interest rate, but the tax savings make up for it. We will deploy those funds for future deals and add $$$ to our rental reserves.