Case Study, please advise. Sell house or go for 2?

[Healthie]

Thanks for your input guys!

Life Situation: 29M, 1 year into career, girlfriend will move into my house in June.
 
Gross Salary/Wages: 28M: 63k/year +/- occasional overtime; work in healthcare. Approximately $1.25/hr increase per year worked.

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. - Nothing so far.

Other Ordinary Income: None currently. When girlfriend moves in she will pay $500/month in rent.

expenses: Mortgage $840/month (Property tax built into this), Hydro $70/month, Gas $70/month, Car Insurance $2275/year. Gas $60/month, Food $310/month, Cell phone $98/month, internet $80/month. My car is a 2010 Toyota Yaris that's paid off: Monthly expenses ~$1718/month. Approximately $1200 for city taxes (Garbage, sewer, etc). I don't know exactly how much, but budget $4500/year for vacations and other miscellaneous spending (tools, etc). Current cost of living is $26,316

Adjusted Gross Income: $36,614. $42,614/year when girlfriend moves in.

Mortgage Principal and interest - trying to contact the mortgage company to find out.

Assets: House bought for $200k with 60k down; Provincial assessments put it at $232k. Many renovations done since moving in: Both bathrooms, kitchen, all new paint, basement flooring + baseboards. 2010 Toyota Yaris. Set of tools worth approximately $5k. $15k in bank.

Other expenses: I have 2 leaks in my basement. It's not a ton of water: the water comes when we get heavy rain, which is not often, and when the snow melts. I've heard estimates to re-wrap the foundation from $10k to 17k to 25k+.


Specific Question(s): My goal is to own rental property. My current house doesn't work for me: I love woodworking and I don't have a shop or garage: I've utilized my basement as a woodworking space. Now that I've painted and installed vinyl flooring I don't want to use the space for woodworking anymore.

My recent plan was to put a 5% down payment on a house with a garage and keep my current house as a rental. I then learned about the 1% rule and my current house does not fit this criteria (bought for $201.4k; I suspect I could rent it for $1600-1800ish). Houses with shops or double-garages generally sell for around $350-400k, sometimes cheaper depending on condition.

My options:
1. Keep the house and find another inexpensive starter house (roughly $250-275k), with or without a garage, and reno it while keeping my current house as a rental.

2. Sell my current house, buy a longer-term house with a garage/shop, and look into buying an apartment (60-85k, rent for 800-1100) or townhouse ($140-180k; rent for $1200-1400).

3. Sell/Keep my house, buy a house with a basement & top-floor suite, and rent the basement out (approximately $900-1100/month).

4. something else?

Any questions let me know!

[Dicey]

Individual amounts of each Pre-tax deductions 401k, HSA, FSA, IRA, insurance, etc. - Nothing so far.

Nope, nope, nope. A new house for you is a want. You need to get your financial house in order before you consider another property.

Keep reading here, keep learning, get your retirement accounts in order. The current pandemic means you have been given a once-in-a-lifetime opportunity to start investing when the market is down. Your future self is going to have plenty of money for shiny new things if you get this right.

And that estimated value of your property is out the window now. After selling costs, and the money you've put into it, you are not going to come out ahead.

[Freedomin5]

If you want to sell your house and move into a smaller cheaper one, then go for it. Then take the extra money and read up on the Investment Order thread, following the investment order listed there. You mentioned provincial assessments, so I’m guessing you’re in Canada? If so, follow the investment order post for Canadians.

https://forum.mrmoneymustache.com/investor-alley/investment-order/

As Dicey mentioned, once your financial house is in order then look into RE investments. If you follow your current plans right now you will be putting too many eggs in the real estate basket and putting yourself at a huge risk. Especially with the current economic situation. Given the number of people who are losing their jobs, it is likely that many will not be able to afford mortgages and will be forced to sell, and the RE market may be softening over the next year or few years. So for multiple reasons, now is probably not the time to be buying more real estate.

[Healthie]

If you want to sell your house and move into a smaller cheaper one, then go for it. Then take the extra money and read up on the Investment Order thread, following the investment order listed there. You mentioned provincial assessments, so I’m guessing you’re in Canada? If so, follow the investment order post for Canadians.

https://forum.mrmoneymustache.com/investor-alley/investment-order/

As Dicey mentioned, once your financial house is in order then look into RE investments. If you follow your current plans right now you will be putting too many eggs in the real estate basket and putting yourself at a huge risk. Especially with the current economic situation. Given the number of people who are losing their jobs, it is likely that many will not be able to afford mortgages and will be forced to sell, and the RE market may be softening over the next year or few years. So for multiple reasons, now is probably not the time to be buying more real estate.

What is a financial house?

[Dicey]

This is the closest to mustachian principles I saw when I fed your question to google, which is something I highly recommend you do and read the other answers. Then come back if you have questions.

https://www.360financialliteracy.org/Topics/Spending-Saving/Goal-Setting/7-steps-to-get-your-financial-house-in-order

[Freedomin5]

If you want to sell your house and move into a smaller cheaper one, then go for it. Then take the extra money and read up on the Investment Order thread, following the investment order listed there. You mentioned provincial assessments, so I’m guessing you’re in Canada? If so, follow the investment order post for Canadians.

https://forum.mrmoneymustache.com/investor-alley/investment-order/

As Dicey mentioned, once your financial house is in order then look into RE investments. If you follow your current plans right now you will be putting too many eggs in the real estate basket and putting yourself at a huge risk. Especially with the current economic situation. Given the number of people who are losing their jobs, it is likely that many will not be able to afford mortgages and will be forced to sell, and the RE market may be softening over the next year or few years. So for multiple reasons, now is probably not the time to be buying more real estate.

What is a financial house?

The term “financial house” is a figure of speech. When we talk about personal financial planning, there are several aspects involved to make sure that you and your loved ones are protected financially. Being protected financially means that not only are to increasing savings and investments (so that your money earns you money), you also need to protect yourself from negative financial events. You need to make sure you have the basics sorted out before taking on more risk in the form of real estate investment or stock market/mutual fund/ETF investments. The basics include making sure you’re not wasting your money on frivolous spending (budgeting), that you are spending (a lot) less than you earn , that you have an emergency fund saved up, that you are paying off debts with high interest rates, that you are maximizing tax-deferred savings vehicles, etc.