How to keep my 1st house? Create idea wanted

[JesseLee]

Dear REINers

We bought our current home about 10 years ago. Last year we purchased a new pre-construction home at a near-by subdivision and we really like it and the closing date is in next 4 months.

Now its time to list our existing house for sale but what we`re find out is that I and my wife are already emotionally attached to this house and we`re reluctant to give up and want to keep it for long time...but meanwhile another closing is approaching and we don`t want to give up either, too bad.

We have built up a very decent equity on the house and there is a big home equity line we can draw from. However, the predicted annual rental income is no way to reach 8% or even 6% of the price even I rent out every room and basement.

In that case, is there any Creative way you can think about to keep 1st house as an investment property after we move into new home? I can accept a moderate negetive cash flow since the year-over-year appreciate is quite good. I`m keen in real estate investment and we`ve already bought 2 commercial properties with good cash flow and now I`m thinking why not start with this house to build my residential portfolio. Any thought? Thanks for all suggestions, either encourging or discouraging.

Jesse

 

[invst4profit]

I have to ask. If you are emotionally attached to it why would you want to rent it out to someone
that could potentially destroy every thing you are attached to about the place.
Renters are a different breed of people than owners and often do not respect the value of ownership.
Yes you could get a good renter but why not try to find someone to buy that can respect and care for the place the way you do.
I doubt you will feel the same about the place as you do now once it has been rented for awhile.
Or why not max out the line of credit to buy the new one (tax deductable interest)and rent out the new one.

 

[GarthChapman]

I suggest that the decision to keep your first house as a rental should be entirely a financial one that is not at all driven by your attachment to it.

Look at the `opportunity cost` of keeping it. In other words, if you sold it what would you earn with thse funds versus what you would earn by keeping it.

Run the REIN Analyzer (also contained in REMA) on it based on your actual cost, and based on 2 scenarios, one financed as is and one re-financed.

Then run an analysis in the same method on an average, or actual, revenue property that you could buy with the net sale proceeds from your house if you sold it (which should be tax-free as it is still your principal residence).

The numbers will tell you clearly what to do.

Hope that helps a bit,

 

[JesseLee]

Thank you for Greg and Garth, I will take your advices seriously into consideration. More and more I`m realizing the fact that we can only choose 1 primary residence and any thing else has to be treated as investment, and investment has to be emotionless.

 

[Thomas Beyer]

Are you running an investment shop ? a business ?

then don`t fall in love with the real estate .. just make money in it ..

decide which property is MORE important to you: the new one or the old one ! Keep the one you like better .. then sell the other !

consider your principal residence a residence first and foremost .. then an investment only !



Always have a home-equity-line ready and maxed out .. even if you don`t use it !