CoC return with LTV 20%

[George Mully]

I'm in a particular spot where I have my primary home with a LTV of ~20%. If I'm looking for a high CoC return, it doesn't make sense to me to rent out my current home if I have so much cash already invested. On the other hand it doesn't make sense to refi or take cash out because I will basically be paying the bank to get my own money out and I will be charged for it. My current loan is lower then current rates and home value has appreciated 20%.

The idea being I would rent out the home and use the cash out equity to buy a new primary home. I'm new to this and know know use cap rate a lot but I think CoC return is a better metric. If I rented out right now CoC would be 6.3%

Given the current environment there are homes in my neighborhood that haven't been rented out in months. I'm think in about a year or less things will start to look up. And during that time there will be more foreclosures and perhaps better deals.

[Jason Pedersen]

Originally posted by @George Mully:

@Taylor L. @Steve Morris 

I’m trying to decide if the best option is to sell and use that money to buy a new primary residence and an income property.

I think when your primary residence is involved there is more to consider beyond the financial metrics. If you are pretty young, don't have a family, tied down to a location for a career, etc., then it might be easier to ignore the intangibles. Do you like where you live? Do you want to move? Those should be important considerations here. If your LTV is 20%, I'm guessing you've lived there a while...

If you see another primary you'd rather live in, and you can comfortably afford the mortgage when you take the equity out of your current home plus grab a rental property, that sounds like a win-win.

Personally, if I owed only 20% left on my primary, I would hate to give up that equity when I can almost see the end of the mortgage. Assuming I wanted to stay in the home, I think I'd be more interested in getting a big HELOC locked and loaded to help you acquire rentals, then paying down that HELOC balance with your rental income. The numbers (loan terms, interest rates, etc.) will really make or break the strategy, though.