Offer Accepted - NOW WHAT {Pics Included}

[Jessie Keating]

I am terrified, but I don't want to let the fear prevent me from the smartest decision.

I own a home now, and my offer was just accepted for my new primary (seriously - hit every check mark on my dream home list!). I am pre-approved with the lender to keep both properties (heck yeah to not having any other debt besides my mortgage, having a high credit score, and liquid reserves). What is the best option based on my goal?

GOAL: Create a stream of passive income that ultimately allows me to retire from Corporate America if I want to. Let's say $10k/month. 

Market: I am in the Phoenix area, home prices are crazy here right now. The numbers below seem so much higher than what I hear on the Bigger Pockets podcasts, but it is what it is. 

Current home: Purchased in 2014 and completely remodeled under the assumption I would live here a while (before I found Bigger Pockets and considered rentals). Mortgage balance $163k, PITI and HOA is $1154. Let's assume rent at $1900/month or sales price of $320k. Pics included for kicks and giggles of before/during/after reno.

New primary: needs ~$40k in work, but will ultimately be worth it. Offer accepted at $415k, comps with one more bedroom sold for $550k - but I will be here at least 5 years, if not forever. Based on my personality, I need consistency with where I live rather than moving with each investment. 

Option A: Rent current, live in new primary

 - Can rent for ~ $1800 - $2000. Let's call it $1900 for argument's sake 

- Landscaping is $100/month, tenant pays water/electric, undecided if I would do Property Mgt company, but most likely. 

- If they don't make me close it, I have a $50k HELOC on the current at 6.75% for remodeling the new primary AFTER closing as to not mess with DTI.

- Can only put 10% down on new house from cash reserves, so I would have to pay PMI. The increased mortgage payment on the new house makes me nauseous, so would likely get a roommate.

***I am terrified with this option. The combination of not being able to put 20% down and being a landlord is clouding my judgement***

Option B: Sell current, live in new primary

- Use the equity for 20% down payment (no more PMI) and for renovations

- Cash reserves remain untouched for a different investment property next year, and more would be added to this fund but then as well

- Very unlikely I would be able to get the same kind of cashflow from property next year, but I could do more "tenant friendly" updates, instead of the marble bathroom countertops I have currently. 

*** This seems to be my gut answer, but I might be saying that out of fear***

This is the current home. Cash on cash ROI in the calculator is horrible because I was not renovating over the past 5 years for tenants, but for myself.