Hey All,
New to the site and for the first time in my life (I'm 35, single) I am really thinking about my money and my future. I know, I'm off to a late start, but it's better late than never? Here's a situation I was hoping you guys could help me with...
I live in Southern California, and 3 years ago, I purchased an older home (it's 40 years old which is old for South Orange County, CA) and the plan was really to buy it as more of an investment property while living in it as my primary residence. I bought the house for $475K, it was appraised last summer for $600K and Zillow currently shows $550K so I'm going to say I've got about $100K in equity in the house. So now, here's reality. I've grown tired of having to remodel this old house and I don't love the neighborhood -- it's not a house I would want to be in when I'm older, I bought it with the intention of fixing it up and selling it a few years later. So I have a couple of options.
Option 1: Sell the house and buy something I would be happy being in down the road. My loan has $400K remaining on it so I'd put about $175K in my pocket and I could use that as a large down payment on a more upgraded home that won't need updating. Then I can save money I'm currently setting aside for home upgrades and remodeling or put that money as an overpayment towards my new mortgage payment.
Option 2: Rent the house. I can probably break even on this house after including expenses for a property manager. I could buy a smaller condo/house and have someone else make my mortgage payments. Since I could rent this house out for about $2,600/mo (per Zillow), it could become a nice revenue stream for me later in life.
Why I like Option 1 -- I have been working hard to reduce my expenses. If I did this one, I could overpay my mortgage on the house I like every month and probably have it paid off in 15-20 years. Downside is that I have a low interest rate (4.125%, 30 yr fixed) and rates are higher right now (but still low historically).
Why I like Option 2 -- I like the potential for income down the road when the home is paid off from renters. The downside is that if I do this, I'll probably still have a mortgage on another home which that income will go to pay.
Are there other options I'm not considering? Is there more information you guys would need to know?
