GKBhogle wrote: Wed Oct 08, 2025 3:09 pm
Hello everyone – I’d appreciate your insights on a housing and financial decision my family is facing.We bought our current home 5 years ago with a 20% down payment and an 80% conventional mortgage as our primary residence. The property has appreciated well – it’s now worth about $800K, and we have roughly $500K in equity. We refinanced in 2021 at a 2.5% fixed rate, so it’s an exceptionally favorable loan.
We’re now considering buying a larger, $1M home that better fits our family’s needs. The plan would be to keep our current home and rent it out for a few years, though we’re also open to selling it later if our situation changes. Long term, we could even see ourselves moving back into it in 10–15 years.
That said, we’re trying to assess whether it’s financially sound to keep it. We could fund the 20% down payment ($200K) for the new home by selling part of our taxable stock portfolio (mostly long-term capital gains). However, our ability to comfortably sustain both mortgages especially without relying on rental income is tight.
So we’re weighing our options (with an inclination to option 2)
Option 1: Sell the current home and buy the new one comfortably.
Option 2: Keep the current home as a rental (to preserve the 2.5% mortgage and potential appreciation) and buy the new one but take on more financial strain in the short term.
Here are our key financial details:
– Married, age 45 (wife 41), 2 kids (ages 15 & 11), living in Texas
– Household income: ~$300K base + ~$100K variable (bonus/quota-based)
– Emergency Fund – $50K (monthly expenses are $10K)
– Current home: worth ~$800K, mortgage balance ~$300K @ 2.5%
– Equity: ~$500K
– 401(k): $700K (started late; not planning to touch it)
– Taxable investments: $300K (≈$100K unrealized gains); plan to sell ~$200K for new home down payment
– 529s: $160K total
– Other real estate investments: ~$400K (illiquid – but profits will flow from 2-3yrs from now)
Questions for the Group
1. Mortgage status: Can I legally keep the same primary-residence mortgage if we convert the current home into a rental? What are the implications with the lender or occupancy clause? Also, with 15yrs more of professional work life remaining (assuming 60yrs to retire), would the lender consider giving mortgage for more than 15yrs ?
2. Affordability: Based on our income and assets, how would you assess the risk of carrying both mortgages ($300K at 2.5% and an estimated $800K new one)?
3. Cash flow: How should we think about liquidity, reserves, and cash flow stability before committing to two properties?
4. Investment logic: From a financial perspective, does it make sense to hold onto the low-rate property for rental potential and future flexibility, or redeploy the equity for a simpler balance sheet?
5. Tax and long-term planning: If we rent the current house temporarily, what should we consider for depreciation, capital gains exclusions, and timing of a potential sale?
We’re ultimately trying to figure out whether keeping the first home and buying the new one is financially sound — or whether it’s more prudent to sell and buy with less complexity and risk.
Would love to hear how others have approached a similar crossroad, and what financial or tax considerations we may be overlooking.
Thanks in advance for your thoughts and time!
to op:
1
Option 1
why? Your numbers are not working for a SFH rental. (single family home = lowest returns/door on average).
2
Can you sustain paying all expenses from your income, negative returns, if the prior home is vacant, not rented, for 1 year?
3
After all expenses for renting the prior home are paid, can you “net” a minimum of 8-12 percent ROI monthly, and/or a minimum CAP rate “net” monthly of 6-10 percent?
4
How would you feel and what would you do if a tenant filed a lawsuit (for whatever reason) against you as a landlord? (not “if” but “when” and often, more than once).
5
How would you feel and what would you do if a tenant poured aquarium gravel down the drain and plugged up your main lateral to the street and you had to do all of the repairs at your expense?
(not if, but when, and more than once).
6
Your thoughts?
7
tips: do not rely on the “biggerpockets” forum for advice and read with high discretion as well. Stick to this forum.
j
former owner: property mgt company 40+ yrs.
mostly former owner/landlord (100’s of units) 40+ years.
pm me as you wish.
