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Discussion Starter #1
I bought a starter home 6 years ago.
Own over 30% (based on the purchase price-- not factoring in what it's currently worth)

But recent (comparable) sales have me thinking of either:

A) Selling & up-sizing--- OR

B) Renting my existing property & using some of that equity (just less than $300k) to buy a second (new to me) primary residence.



Any insight, experience or resources/articles would be helpful.

Thx.
 

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For option A, do you need to up-size? It is foolish to buy a bigger house than you need. Maintenance costs, property taxes, etc will all be higher with a larger house.

For option B, evaluate the rental of the existing property as though you were thinking of buying a new property at the price you could get for it. Let's say you could sell the house for 600k, and you could rent it out for $2000/mo. Property taxes are, let's say, 3k/year, and you spend 1k/year on maintenance. So you'd be making $20k/year profit on a 600k investment. That's 3.3% return, which for me, would not be enough to entice me to do it. Of course I have no idea of your actual numbers but you get the idea of how to think about the calculations.

For both these options you're thinking of getting another property after you sell this one. Has your particular property gone up in price much faster than the proposed replacement properties? If yes, then it might be a good idea, but the odds are that the other properties have gone up just as fast, and so you'd end up no farther ahead by switching. And there are costs involved in moving - land transfer tax, lawyer fees, moving service, realtor fees if you sell the old house.
 

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Most properties which one would buy for living in don't make good rentals when it comes to cash flow. Rentals need to be cheap enough to produce positive cash flow. A good rule of thumb is the 1% rule, so you rent it for 1% of the purchase price.

My bet is your residence is far from capable of earning 1%, so I'd vote to sell it.

If you really wanted to own a rental, I'd still sell it, use all the equity you could to buy your new principal residence, then borrow against your principal residence and buy one or more much cheaper places which you could use as rentals.

A good primer on real estate investing can be found at www.easysafemoney.com.
 
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