Long Term Rental vs Short Term Rental -> New Primary House

[Kyle Wise]

Hi Everyone,

I would like to get everyone's insight as I'm evaluating two different options in the October time frame that involve upgrading our primary house to a larger house that better suits our needs. Let me know if this should be posted elsewhere on the forum. 

I'm trying to utilize the leverage of the primary house upgrade to acquire another investment property, either a new STR or LTR of current property. I've ran deal analysis on both scenarios but wanted to reach out to the collective group to see if I'm missing something and how your would approach it.

Primary House: $650k (Market Price), $330k in equity @ 3.6% interest rate. Goal would be to move into a new $800/$850k house. 

Option 1: Sell current house outright, capturing equity and purchase a new STR in Kissimmee, FL

-Take equity and put 20% down on new house = $160k (Wouldn't pay full closing costs because my wife is a realtor)

-Utilize remaining equity to purchase $600k STR in Kissimmee area with projected $75k-90k gross income based on comps.

-$600k STR @ 15% down = $90k + $30k (upgrades) = *120k

Note: I currently operate and manage a successful STR in the North Carolina area so have experience in the space.

Option 2: Rent out current house and use Heloc to help fund the remainder of the 20% down payment on new house

-Based on rental analysis and current PITI, I would cash flow $500 a month renting out current house

-Would need to HELOC $80k to help fund $20k down payment on new house + potential upgrades.

Thank you for taking the time to offer your guidance!

Kyle