Your thinking is on the right track. Your accountant will make you go broke with his thinking. As I said in a previous post, the accountant works for me- I tell them what I am going to do and they figure out HOW to do it. Your explination was a little unclear but here’s what I would do in your situation. 1. Do you really need to move? If the house suits you, stay put. 2. Refinance your equity. If you are going to stay get out some of that equtiy and use it as the down payment for several rentals. Spread it around so you get the most bang for the buck. and 3. STUDY so you know what’s what. Best, Scott
What an informative site! I am wanting to get into some REI. I mentioned it to my Accountant the other day who has played the rental game in the past. He kinda frown on it as he didn’t like dealing with renters. He did like commercial investments however.
I have approx. 100k equity in my current house 10 years left on loan and my accountant says I should sell and move up. My thinking is I should consolidate the 1st and 2nd (72k) to a 30 year take in the +500 per month cash flow from renting. Then purchase a second house with a payment of 1100 per month (600 current payment + 500 cash flow) end up with the same money out of pocket in a nicer house and still have the 100k equity to work with. Is there a flaw in my thinking?? Thanks for taking the time.
It is good to add here is how to extract that equity. The best way I found is to establish an equity line of credit on your residence BEFORE you move (if you still plan to do so)for several reasons. First, it is less expensive that refinancing. Second, the rates are very low (at prime) for lines over 100K. Third, it is all tax deductable. And to top it off it is easy to payoff and reuse if you sell a property. And there’s more! It doesn’t cost anything to keep open if you choose not to use it and it’s there if you need it for any emergencies. You can even get an interest only payment to increase cash flow and pay any amount of principle at will. Now follow the advice of the others that answered here and you will be on your way.
Well at least you are getting your advice from a professional and somebody who is experienced with rental properties. However, everybody is different and there are thousands of different real estate investment approaches. The accountant does not like dealing with residential renters and recommends another class of approaches: commercial rentals.
Well, you might enjoy residential rentals. YOu might hate commercial. If you are considering rents residential properties, you might try it out in your mind before you commit money, time, and effort to it. I’d recommend reading a couple of property management books. It tends toward the dull side but, the one liveliest is “Landlording” by Leigh (pronounced “Lee”) Robinson.
I agree with Broker Scott–why spend more money on a more expensive house? This is consumer spending, the downfall of millions of people in this country.
I do like the idea of refinancing to pull out equity and buying other properties. You might find that you have a better cash flow situation than the scenario you that you mention.