Hi
I currently have half equity in a big house, in a good area, close to work and school, in an environment of low supply/high demand. It has two kitchens, two living areas, and five bedrooms. It's possible to lock up the downstairs area (1 kitchen, 1 bathroom, 2 bedrooms) and rent it out. (Probably just need to reorganise the electrics - there's two metres but only one is being used currently).
My query is: what would mustachians do? get a loan for the other half of the house? Or, should purchase a smaller place (an apartment could be purchased mortgage free).
I am quite torn, as the big house needs a bit of maintenance but the rent from downstairs would cover the mortgage interest and property rates, and the proximity of facilities is within walking/cycling distance.
If things got really bad (ie I lost my job), I could move downstairs and rent out the top for a higher rent, which would cover the loan repayments.
Alternatively, I could commence investing if the smaller apartment was purchased.
I am a little concerned about the smaller apartment because it would be a shoebox (I can swallow that frog though! But my son's another matter) and there would be no place to store the push bikes. Also, the smaller apartment comes with body corp fees and wouldn't appreciate as much as the house would.
Here's the figures:
Whole house value: 700,000
Half the house: 350,000
Mortgage required: 180,000
Current interest rates: 5,25%
Rent expected from downstairs: 350 per week (gross)
Currently saving: 44,000 p/a (after tax)
Currently living off: 20,000 p/a (after tax)
Total income: 64,000 p/a (after tax)
Currently have no debt - pay off credit cards in full
Thanks for reading