Looking for advise when I move with what to do with my equity.

[Ryan Murnighan]

My family and I are looking to move between January- April of 2025 and we bought our current house pre 2020 so we have a large chunk of money in equity, we really have 3 options on our plate. A short back story is a long term friend and co worker and I have been talking for a year about getting in to rentals (his parents own 12). Him and I would be 50/50 as we are both a little shy of that much financial responsibility to start alone. so our options so far are....

-Move and use all the equity towards our next house and stay out of rentals?

-Move and split my equity 50% our personal house/ 50% on a rental? (this would cover my half of the rentals mortgage)

-Move and use my equity to pay 100% of the rental mortgage and use the rest towards my personal house?

I understand some of the pros and cons of going in to business with friends and family but we are both worried of taking the solo leap into rentals. We are in good and respectable careers so I am not worried about him defaulting on his half. I also understand id be splitting the reward/ rent but that's why I think if I can pay 50% with him or 100% alone then is minimizes a lot of my risk. cast your vote and help me out, ahah I'm new here and to the world or real-estate so take it easy on me please.

[Jason Wray]

Ryan,

Avoid putting anything more than 10% into your next primary when you move into the next home.  One option is do a cash out refinance on your current home and use that money as a down payment and vacate the home to transition it into a rental.  Its easy to check the Max cash out on the new loan to see if it can be rented to cash flow.

If not I would simply put 5%, 10% or 15% down, put the rest in the bank and only use 40% of that money as your 50/50 down payment.  Its tough to give more advice without actual numbers to see the sale proceeds versus the down payments.

Nothing wrong with a 50/50 split other than when it comes time to take out your share in cash other than split rents.  If you own a property 50/50 and one person wants to refinance or pull cash out to buy another property it has to be a 2 way agreement since both have to sign.  

You also have the possibility that something an happen where one of you need to sell or take your cash out early. Having to buy someone out it not always easy if you cannot refinance to pull their portion out if the LTV is not in line.