Renting out current house as first investment?

[Alfie Park]

Houston BP community,

I wanted to get people's advice / thoughts as I try to get started with my first investment property. I'm leaning towards buying a smaller house for my family of four with a conventional 20% mortgage, and renting out my current home to get started, the reason being:

1) Conventional mortgage can get me much lower interest rate (I've heard a full 100 bps lower vs. investor loans- someone please verify)

2) Current house is a bit bigger than we need (2,800 sq ft) and by downsizing to a smaller and cheaper house (thinking <2000 sq ft, $175K target price), we can get more in rental income from the bigger house while assuming a smaller monthly obligation from the new smaller house

Below are some numbers to clarify the situation. Thanks in advance for your insights!

1) Current home (to convert to rental)

• Bought for $245K a few years back, monthly PITI of ~$2,000 per month (3.125% rate 15-year mortgage with 20% down)
• Can fetch fair market rent of ~$2,000 per month once we move out and put on rental market; with some vacancies and maintenace built in probably more like $1,500 per month in net rental income per month
• Great neighborhood in NW Houston suburbs with lots of nearby commercial/retail development as well as excellent 10/10/9 schools, so good price appreciation potential

2) Target purchase home (to move family into)

• Looking to buy ~$175K home, much smaller square footage, with monthly PITI of ~$1,300 per month (assuming 4% rate 30-year mortgage with 20% down)
• Probably will buy in same neighborhood given great schools and retail development
• Essentially, I would gain $1,500 per month of rental income from the old house and assume an incremental $1,300 per month in PITI from the new house, so this would seem to help me generate some income