All Forum Posts by: Nathan A.

I wouldn't concentrate on how much more the house costs now, I would concentrate on what it rents for and whether the cash flow numbers work. Are you saying home prices alone have increased whereas market rents have held steady?

Your vacancy allowance seems very low (turnover only once every 4+ years), and I don't see any insurance or capital expenditures. Are you sure you can get a 6% interest rate with no points?

One way to look at it is since you are selling one place and buying another, the worse a time it is to be a seller on your current property, the better a time it is to be a buyer on a new one, and vice versa. So it would balance out.

That said, you would probably be replacing a mortgage at a lower interest rate on your current property with a mortgage at a higher interest rate on your new property, and that would really eat into all the savings you were hoping for. I would look carefully at that math as you decide what to do.

Are you confident in the numbers yourself, you aren’t just taking someone else’s word for the numbers, right?

If so, at some point, you are going to have to take a leap of faith and learn by doing.

If you've talked to a lender and confirmed you don't have enough income to buy a multi-family in your market, I would think about buying a single-family and renting out rooms, or finding ways to increase your income.

That's if you intend to live there, not rent the entire house out. But you could use an FHA loan if you intend to house-hack by renting out individual bedrooms while you live there, which is the strategy I'd recommend if it works for your situation.

If you're interested in buying an investment property (one where you don't personally live and you rent it out) you will need a larger down payment, and you need to learn how to run the numbers and determine the property's cash flow and potential return on investment. That's the most critical thing to look for when buying a rental property. There are a bunch of resources and calculators for that on this site -- take a look at those and continue your education.

Given that you talked about owner occupied financing at 5% down to house hack, are you planning to move there and occupy one of the bedrooms while your guests use the other rooms? Unless I’m missing something I don’t see how the math works for that strategy because you’d need occupancy 365 days a year at about $75 a night just to cover the mortgage, let alone other expenses, and private rooms don't seem to go for much more than that.

How much cash would you have left if the addition goes 50% over budget? Would that leave your household with less than six months of an emergency fund? If so, get the HELOC to be safe. Your growing family needs you to be financially safe.

Good luck with the baby and my hat is off to anyone who can manage a project like that while expecting.

What I would do in your shoes: Identify some on-market Class B properties based on your knowledge of the area. Analyze a couple and determine if they would have positive cash flow if bought at a discount to full price. If so, look at whether the fundamentals of Wilmington are attractive long-term by looking at data like this. If it passes all these tests in a way that your local area does not, I would vote that you go with Wilmington rather than trying to find something else "best" out there.

I wouldn't focus first on the difference between owner-occupied and investor mortgages, that's like choosing condiments before you pick what you want for lunch.

I have to say I don't love the idea of buying with your sister no matter how awesome your sister is, because it ties your financial life together with your sister's financial life in a way that just isn't very flexible for either of you, especially if you are on opposite coasts. It's not like you are just splitting a restaurant check here, you'd both presumably be making the most expensive purchase of your lives and using up huge amounts of your life savings to do it. If you do buy together, make sure to create a formal partnership agreement that covers things like what to do when one of you wants to sell and the other doesn't, what happens if your sister stops wanting to live in a house-hack, and the like. Even then having things in writing up front doesn't preclude a strained relationship later.

I really dislike the option of investing somewhere you don't know.

That brings me to your third option, mostly by default, even though it means waiting. My two cents.