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Personally with the rentals cash flowing nicely at low interest rates, I’d leave them be and let those ride.
I guess this reaction was in response to buying a second primary. If the money is being saved and invested then that’s different.
We have cash parked to the side for the purchase, but what I wanted to seek advice on is whether I should (1) sell the 2 family primary, roll the equity to the second primary house or (2) keep everything as is, and borrow some more at higher rates to achieve the goal of a secondary place or (3) stay put, don’t yolo and continue to hoard cash?
Coach
How much cash did you put down on the current investment properties? How much equity you got in them now?
For example, $400 per month doesn’t seem like a lot so might make sense to cash out. But I don’t know until you provide more info.
First house I put 150k cash in 2012. Equity built around 750k?
Second house I put 400k cash in 2019. Equity built is 750k as well
So that makes 1.5mm in equity.
If I sell the first investment, likely I would just spend more on the secondary primary (go big or go home - which is a little against my original investing / wealth growing principles). I think I’ve hit a point where I just want to enjoy my years of hustling
Rates on the houses are low. And we purchased bc of appreciation
How old are you? Personally, I wouldn’t sell. It pays for itself and the equity will (almost certainly) keep growing, since it grew so much thus far. You pay off those mortgages and you’ll be drowning in cash every month. There also might be some negative tax implications if you sell.
Coach
Attorney - almost certain equity will grow? What happens if mortgage rates hit 10+% and values decline?
Personally I would keep them and see if you can do a cash out refi or a Heloc to pay for your 2nd primary if that’s an option.
Have a heloc open for the primary residency (no mortgage). Could probably still qualify for more mortgage (as I file residential rental income)
I would say dont buy a second primary property unless you believe God is compelling you too.
At today’s rates/numbers, you are probably better off just paying for a few trips a year to the place you want to buy this house vs. buying this second primary there
Or
If you plan to buy this second primary at such a distance from your first primary that you are able to rent it out as a vacation home / airbnb it to others while your family is not there
Secondary primary is more for school purposes. Primary house does not have best schools
Why not take out a HELOC on the properties at least to the point that either a bank will let you and or so you’re still cash flowing, and make more efficient use of your capital by putting that equity into your next investment. Also, are your rental rates at market, could you up those at all?
Not all rental rates at market - I’ve got an older couple in 2 bedroom for $500 a month, but they’ve been in the house forever so we don’t want to increase until we turn those tenants over…so in other words we have more potential to increase rental cash flow
I already have a HELOC for $500k. I think the biggest thing I’m struggling with whether I should make this purchase when it sort of gies against my original investing principals (which was live within means, but now that I’m in my 40s and raising kids…I just want to live a little and wonder if i am taking on more risk than I need, if I make the jump)
Isn't that a much broader decision. The secondary residence is more consumption than investment right? To me, this isn't so much about optimizing your other investments but rather your budget, net worth, net worth growth with or without this, and does doing interfere with your financial goals more than the joy you get from this. I can't answer that. I am not really into the vacation house thing. Would rather invest in income generating properties and pay to stay where I want to go. But know lots of people who like them.