Without getting into a huge case study I'll try to give everyone the abridged version and I promise not to leave out anything important.
Necessary background: The housing market in Seattle is stupid. Our home which was purchased for 299k in 2011 is now comfortably worth 500k. While I realize no one can predict the housing bubble it is showing no signs of slowing here. Construction is in full swing and with many huge companies investing a lot in staying and growing within the city. Rather than renting out my house in a traditional sense which would rent for about $3150 a month, I believe that vacation rentals would yield a higher profit. After speaking with 2 other owners in the neighborhood who have done this I reached out to 3 companies all of which landed in the area of us netting $36,000 a year after expenses, I did my own back work on this and found this number to be quite realistic. managing a vacation rental on my own is not in the cards right now.
Reason for renting... Housing market continues to grow, home helps pay for all the loans below, and property become passive income as well as a foothold in the Seattle market. We see where the market goes; this also leaves the option to sell on the table and at virtually anytime. Ideally the home just becomes a cash cow.
Problems: We continue to pay about 4k a year in interest (albeit quite a bit is a tax write off), the market could, although unlikely, completely crap out and we miss out on the funds we could have gotten at one point.
Reason for selling.. We would have 0 debt and we walk with about 90k after all is said and done and paid off.
Problems: We still need to buy a home. I work in the heart of downtown Seattle and my wife on the Eastside anything in a reasonable distance from both of our work is pricey.
Expenses Monthly Interest Maturation Date Total due
Mortgage $1,800 4.13% 2043 $274,782.00
Equity Loan $563.07 3.49% 11/1/2023 $52,400.00
Chase Loan $140.72 3.25% 11/21/2030 $21,253.00
Car Loan $250.97 1.95% 11/1/2016 $9,939.00
Sallie Mae Loan $221.23 6.30% 10/1/2027 $10,873.00
Sallie Mae Loan $74.34 6.15% 4/1/2021 $16,043.00
TOTAL LOAN DEBT $385,XXX
No CC debt and the equity loan was purely to refi my wife's student loans to a much lower rate.
Other stats:
Investments/ savings= $28,xxx
Household income=$113,xxx
What would you do?