woodburyowner said:
Cares said:
woodburyowner said:
If you want investment properties, buy ones that make sense as investment properties. The trade-up properties that turn into investment properties rarely make sense if you factor in the equity in the property.
I'm not sure I follow what you mean by factoring in the equity in the property? The more equity you have the assumption is that rents are higher and you have more cash flow. If you are concerned about equity then do a cash out refi and pull equity out.
Most people think only about their PITI when figuring out if they should rent out their current primary instead of selling it when trading up. For example.
Someone bought SFR 8 years ago for $900k (say $200k down). PITI + HOA is $3700. They can rent out their property for $4000 so they are happy since they are "cash flow positive". However, what they don't factor in is their property is now with $1.3M (600k in equity now). At 1.3M, the numbers don't look very good. They should sell and purchase 2x smaller townhomes and their rental income will be much higher than $3700. You also need to factor in MR + HOA cost to determine if the property will make a good rental or not.
That SFR is likely assessed at 1M for taxes and the tax bill is $12k a year.
Two smaller properties purchased today will be assessed at 1.3M and the combined tax bill $15.6k
Subtract that 3.6k tax expense from increased rent collected annually. Oh, while you are on the spreadsheet, do not forget to factor in selling costs, buying costs, potentially higher interest rate on investment purchase etc....
In the end, either choice would be only marginally better/worse. That's my bet.