Hi,
Bottom Line upfront: I am looking for a solution or advice on how to keep our paid-off house and rent it, but not be house poor by building/buying another house because we did not sell this house.
My situation: My family and I live in a house that we managed to pay off rather quickly. We are hoping to move or build a house in the next few years. I want to keep the house and use it to get us into the rental-property side of real-estate. My wife isn't sure but is open to it. After running the numbers, there are two things I am unsure about how to provide solutions to.
Issue 1: Building up enough money to make the 20% down on the next house as well as set aside 6 months of the new mortgage in order to qualify to keep it and get another mortgage (is this even required). Essentially, most of our money is tied up in the equity of our current house, which has also increased in value by 43% since we purchased it. So, should I sell it and buy another rental with part of the profit and use the rest for a down payment, or keep the house without a mortgage and take a separate mortgage out with little down payment on our new house?
Issue 2: Based on what we could rent our current house for, we would have more than enough to cover the budget even if we put a small down payment. That is calculating everything from a new landlord insurance policy, higher utilities for a bigger house on our new house, to budgeting for 15% vacancy as a "monthly" payment. However, if it does go vacant, it would be very tight. So again, the issue comes to the down payment and cash flow.
Any tricks to capitalize on renting a paid-off house without getting rid of it? Any advice on my current situation? Thanks in advance.
