Hello Everyone! I need some advice. I'll try to make this short.....
I'm trying to decide whether to refi a current rental to purchase another rental(which is kind of a unique situation), or do nothing and try to pay off my debt. Here are the deets:
We currently live in an expensive (all things being relative but average home price is over 400k) housing market and we purchased a townhouse before the boom and have a decent aount of equity in it. It was a primary and then we moved to a new primary and are renting the townhouse. It is currently cash-flowing $500 a month. However, we are within the window for a major tax break, if we were to sell it by September of this year we would pay NO TAXES. We could probably walk with 120k. However, I happen to love the property and had actually hoped to retire there someday when renter had paid it off. HOWEVER, we have just been offered the opportunity to purchase a fixer-upper in downtown (which is really untouchable otherwise for us at this point) at a great price that is also zoned for an business/airBNB. It has to potential to cash flow very nicely ($1000-$3000 a month) and I think it could be an important step toward FI. I'm just very nervous about taking on this much real estate debt. I would have to refi the townhouse for the repairs on the downtown house but I would still have at least 25% equity in both. That being said I have a 16k car loan and a 20K student loan. I'm feeling very torn between wanting to be debt free and knowing that having two assets that are appreciating and that someone else is paying off is a good thing! I guess you can say I'm stuck between the bigger pockets and dave ramsey philosophies. They both make sense but I don't know which one makes the most sense for US. Also, I am 42 and my spouse and I earn a very good income but have only about 70K in retirement in addition to 60k of equity in our primary and the 120k in the rental. Here are my options.......
1. Do nothing. Keeping cash-flowing the rental and work towards paying off debt and stockpiling cash. Keep current mortgages which are 167k(rental) and 340(primary)
2.Sell rental, take 120k and pay off debt and buy the other rental with what's left
3.Refi rental (will still pay for itself but not as much cashflow) and buy the downtown property for air bnb. This option has the potential to generate $1000-3000 per month and is a very desirable location.
I would love to hear people's thoughts. Thanks so much in advvance!