Hi all,
We are planning on moving next year to a very high cost of living area. We are going to convert our current primary into a rental, and it will likely cash-flow well enough (including capex, maintenance, vacancy etc.) to also cover the loan repayment on a $60K home equity loan amortized over 25 years. I was considering our housing options for the move and they fall into two options that I'm considering:
1) Take out a $60K home equity loan, and a $50K 401K loan, and dip into savings to come up with 20% down on a primary in the HLOC area.
2) Rent for a couple-ish years at $3k/month until we save up enough for 20% down
This is sort of how I've been thinking about it:
Option 1
Pros:
1) Only have to move once
2) Appreciation on the house in the HCOL area over the two or two + years it would take to save up the down payment if I rented instead
Cons:
1) Reduced 401K performance
2) Feels a little scary to pull equity out with a home equity loan since I've never done this and it was not part of my initial investment strategy
3) Less cashflow from primary once it becomes a rental
Option 2
Pros:
1) Less stress about 401k and home equity loans
2) Better 401K performance
3) Better cashflow from current primary once it becomes a rental
Cons:
1) Two years of rent
2) Two years of missed appreciation
Other info that might or might not be relevant: We have two modestly cash-flowing rentals besides our primary. The house we are looking at in the HLOC area would meet the 30/30/3 rule (counting the 401K loan and the home equity loan).
OK folks, what should I do? Am I thinking about this the right way? Thanks!
