What would Grant do?

Question

Justin Jocewicz · Answer

Keep cruising the way you are right now and use what is left of your savings (minus your 3-6 months) for investing.  If you have around $30K, you can get a cash flowing property that will be an asset, have cushion in case we crash and bring you money each month.  :-)

Douglas Dowell · Answer

I think Grant has said and I agree that Multifamily is priced for perfection currently i.e. way to expensive relatively. see  //grantcardonetv.com/articles/real-estate-too-much-of-a-good-thing

The next question which is tough to answer is where would you deploy the gain?  Possibly spec homes? Hard Money are two that make the most sense to me right now outside of commercial development.

Justin Cabral · Answer

Thanks for all the feedback. Good discussion points.

After reading your feedback and putting more thought into it I think that not selling my current home and renting it out is a good idea because I can continue to overpay the monthly mortgage bi-weekly to pay off much earlier and the rent I can charge will cover that amount.

As far as where I would live if I rent it, I would like to stay in Doral but again I fee like everything is way too overpriced. For example, why would I buy another place just like the one I already have when the price is probably at its peak? And why would I rent a place like the one I live in for $2400 per month?

David Fernandez · Answer

@Justin Cabral, I think Grant will tell you to sell your town home and buy a 20+ MF building ;-)

Now seriously, I face a similar situation like yours with my primary residence and these are the scenarios I run:

1. Rent it out and buy another property: You mention that you will have a monthly CF of $400-$600 based on your current payments and market rent. Keep in mind that your CF will be lower due to an increase in taxes as you won't be abler benefit from the Homestead exemption that you are probably currently taking advantage off (not only you get $25-$50k off assessed value, but your assessed value can't increase more than 3% year to year. This is huge is you bought it at the bottom). Also, you will have to have some capes reserves build up.

If the tax increase you'll face is feasible and you still have a monthly CF you like, then you could rent it out and have this CF help you pay your next loan.

2. Refinance: I got a 4.625% interest when I purchased my home. I refinanced it at lower it to 3.25% (both 30 year)  and got $80k out of it. That's the amount I needed to purchase another property and that kept my monthly payments the same due to the difference in the interest rate.

You can explore this option. If you can find a lower rate mortgage, you may be able to keep the same or similar monthly payments and still get some cash out now that the market is still hot (starting to correct though). You will take advantage of the hot market by pulling equity off your home without increasing monthly payments and still keeping this property. Then, you can buy at a later date with this proceeds (if you think now it is not the moment and the market will correct in the future)

3. Sell and purchase another home taking advantage of the primary residence tax exemption up to $250k/$500k (single/married). You will need to find another place that meets your criteria and, as you mention, the market is hot now.

There are many more options you can seek, but these are the 3 primary I looked at when trying to make a similar decision. At the end, it will come down with what you feel more comfortable with in your situation and future plans, if you can find another property you like at a good price or other investments that can return what you are looking for with the money you pull from the equity, if you sell/refinance.

Jean Pierre · Answer

Keep what u have and I've in it. Find another property to rent out. Duncan find some nice duplexes, triplexes, etc for a decent price still in with Florida

Ernie Cruz · Answer

Hi Justin,

first off, I would like to say that I think paying off the mortgage is a great goal and one that I personally share.

My personal opinion is to keep the townhome and look into the possibility of purchasing another property for rental income. I based this recommendation on the fact that you would like to stay living in Doral -- there are not many places close by that are similar.

I agree that right now is a difficult time to buy something in south Florida, but I would urge you to not only try locally anyways (you never know if you come across something unexpected!) but also something that is maybe and hour or an hour and a half drive from Doral.

Maybe you could also consider getting a HELOC, though trying to pay that off would conflict with your goal of paying off your mortgage in 10 years.

Just throwing around some ideas. Good luck!

Justin Cabral · Answer

@Jean Pierre

Thanks for your input. Are you referring to renting it out and buying another place as my primary residence.

We would really like to stay living in Doral and I feel like todays prices in Doral are outrageous for what you get. Plus I really don't feel like it is a good time to buy in south Florida.

Can you elaborate on your thoughts?

Jean Pierre · Answer

knowing doral and the outlook for doral and south Florida I would say keep it and get something else in south Florida.  I wish I bought in doral when I had the chance knowing what I know now

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