We’ve just started on this mustachian journey and if I’d found this site 7 months ago, I probably would have made a different decision, namely stay put where we were and achieve financial independence a bit sooner. But I decided to take a job in a new city, lateral financial move, but to a city with more culture, easy access to beaches and a better overall vibe and more expensive housing, my husband did an easy lateral transfer as well. The new city is about 1 &1/2 hrs away from our old digs. In doing so we had to put our much loved and renovated home on the market. We did this about 2 months ago and while we’ve had interest and good feedback, there’s been no bites, even though we are priced low relative to other properties. We went ahead and bought a house in the new city and have been making the extra mortgage payments for the last couple of months. We just recently dropped our price on the house, but if it sells for around that price we will still walk away with about 60K. But 2 months in we are now at a cross-roads, I don’t really feel like carrying both mortgages for the next 6 months if the house doesn’t sell before the market quiets down for winter, but my husband is very adverse to renting. I’d much rather rent and start investing our extra money than keep throwing it at this house. My parents live up the street and my dad is super handy and is willing to be the on-call guy should any emergencies arise if we did get tenants, so it wouldn’t all fall on my husband. My job back there had been a contract position with a company that I definitely did NOT want to be staff with, but the writing was on the wall and that is the way it was heading, for less pay. So I jumped ship, so reversing this decision would be difficult as good paying jobs are hard to come by there. I would appreciate any sort of feedback/ideas on how best to handle this situation. Here’s some #s.
House #1 For Sale: $319,000
Mortgage #1: $240,000 (we owed $140,000, but took out $100,000 to put down on our new house) @ %2.84 for 3 years
Mortgage Payment#1: $1000/mth + $180/mth (insurance & property taxes). $560 = interest, $440 = principle
Potential Rental Rate: $1300 ( I know pretty low, but it’s not a bustling town…which is one of the reasons we wanted to move…that and it rains 10 mths out of the year)
Basically break even if we rent it.
House #2: Bought for $360,000
Mortgage #2: $255,000 @ %2.99
Mortgage Payment#2: $1400 + $290/mth (insurance & property taxes)
In my mind it makes sense to find a reliable renter for next month, start covering our costs on that house and start throwing the $1300 into index funds which would give us $50500 in 3 years (assuming 5% IR) PLUS $15840 paid off on the principal on House #1.
We could get lucky and our house sells in the next month in which case we have $60,000 to invest right off the bat which would give us $69,500 in 3 years. A bit more than scenario 1 BUT, we could end up sitting on our house for the next 6 months or having to reduce our asking price again. About the only thing that I feel in control of regarding this whole situation is my ability rent it out given that anything else depends hugely on the real estate market. Thoughts?