Quote from @Baron Wheeler:
Thank you both for the feedback.
The wife and I talked last night and think we figured out our predicament.
The house we live in has a 180k loan and we bought a 60k lot to store our trailer in since trailers are not allowed at our house. Total mortgage for both of those is $2400 a month. We can sell our house and come away with around $500k and get rid of the debt and move back into our current rental and use the funds from the sale of our house to invest in 2-3 more rentals and the numbers work out to be making a profit instead of barely scrapping by.
Now we just need to do some more number crunching to figure out our market and the best way to reinvest the 500k after we sell.
We would like lower risk. We followed the Dave Ramsey plan for years but have drifted from that to a point but still don’t want to push the debt envelope and get into a bind. We are more of a slow and steady with lower risk.
This sounds like a pretty good plan, if you lived in your current home for 2 out of the last 5 years then it will be a tax free gain, that is extra helpful. Your biggest savings in this move is that you will be reducing your housing expense by moving into a smaller/less expensive home. I know you don't like debt, but debt in rental properties can be good debt, I like to calculate the return on equity when I'm trying to figure out what the best decision would be, here is a post I did that might help you: https://www.biggerpockets.com/forums/12/topics/1108744-how-t...
I would be cautious about investing for cash flow in year one unless you can get appreciation as well, as prices appreciate so do rents so your cash flow improves over time. If you invest in a place that has good cash flow in year one, but it never appreciates then you will regret the decision by year 3 or 4, and like @Becca F. said: your returns will be diminished by increasing expenses. To get appreciation you usually need population growth and job growth, you have both of those in a lot of Colorado, not so much in most of the mid-west. We also have good growth here in Arizona and prices might be a little less than Colorado and taxes a little less too.
If you sell your primary and move into your rental I would encourage you to take $400k of the money and buy 3 rental houses in an appreciating market (CO or AZ) and put just enough down so they cash flow break even in year one and then hold the other $100k for reserves. And if you buy new builds your cap ex / maintenance & repairs will be minimal for a few years, this will give you time to increase rents. These purchases could be $330k each and 30% down, with builder incentives to buy the rate down you can get them to break even in year one and it will only get better from there, rents will increase over time and refinance in a few years. If you are worried about market volatility then just buy them one at a time with 6 months between each purchase.
I hope this is helpful!
