Just writing to get some thoughts and opinions on what might be the best way to approach buying a second home. I should say, at the outset, that it probably isn't the most mustachian thing to do, but it is very important to my spouse and I know we'd get a great deal of enjoyment out of it. We are also not planning to RE, so the thought is it is something we can enjoy during the next 15 years of work.
The places we are looking at right now are in the 350-450 range. We have enough cash to put 20% down, but we also have about 850,000 in equity in our primary residence, and are wondering if we would be best served to tap that equity, either for a larger down payment or maybe even to pay cash for it. The big unknown right now in California is whether or not the legislature will pass a law that prevents homeowners from claiming the mortgage deduction on the home. They have tried in the past, and failed.
Anyway, a little more context:
Take home pay (after 401ks maxed, insurance, social security, etc). $140,000
Rental income (we house hack) $31,200
Current Expenses Mortgage (owe 650,000). Just appraised at 1,510,000 (but of course that can change. We are close to a large research university, so housing always seems to be at a premium here. the last two years have been insane in the membrane). Our current mortgage payment is 3400, 2600 of which is covered by our tenants
Property Taxes $15,000 (HCOL area, with good schools)
We have no other monthly expenses and keep our overhead low. Currently we are living on one income, and we are saving about 4-5000 a month.
So the questions:
1). Should we put down a larger down payment than 20% (would require tapping into some taxed equities or the house equity)
2) Should we consider drawing down even more equity from the house and pay cash or close to all cash for the house (thus anticipating, perhaps, the legislature's decision to not make tax deductible mortgages on second homes).
3) Should I convince my partner this is the path of folly and, if so, how? He works very hard and I think wants a second home to enjoy on the water with our dogs and families. But I remind him, two homes, twice the maintenance!
Many thanks!