I am seeking some opinions on various options I am considering regarding purchase of new property and my current rental which used to be my primary residence before moving abroad. I am currently living overseas and will be relocating back to Texas within the next 6 months. Currently debating a couple options including 1) moving back into our current rental property when lease ends, 2) buying a new home and keeping the rental, and 3) buying a new property and selling the rental.

I have a good chunk of equity tied up in the rental, it is 100% paid off for and cashflows about $22K net per year. Current valuation around ~ $775K. Property located in Energy Corridor Houston. Obviously a lot of equity tied up for not a huge return. New homes we are looking at would be further outside in the burbs, something like Bridgeland/Cypress, around $0.9M - $1.1M.

Scenario 1: move back into rental when lease ends, pretty straightforward. No mortgage...life is good.

Scenario 2: Keep Rental
What would be best way to navigate this from a loan standpoint? Should I be pulling some equity out of the rental? I am not one who like to carry large mortgage and like to pay off quickly, would likely only want to carry a total of ~ $500K or less in mortgage, especially with current rates. I guess the fundamental question is this property making enough with enough appreciation potential to keep it or is it time to move on.

Scenario 3: Sell Rental
I would want to purchase the new property ahead of selling the rental. What would be best way to navigate this from a loan standpoint? Bridge loan that I can immediately pay off once the rental is sold and then another smaller loan + cash down payment?

I think the question for me would be this:

If you didn't own this property already, would you buy it today, all cash, for a 2.83% cash on cash yield? If no, then you should do something else besides the current setup. So for sure either refi or rent it. But don't let that capital sit making less than inflation. Personally, I'd probably do a refi and put the money to work somewhere else too, and get that ROI up as high as you can. But it seems like you value not having debt also. And that's worth something for sure. Maybe keep the existing house as a rental and lever up on your new home while paying it off is the best solution for you personally. My contact info is in my profile if you want me to run more exact numbers for you. I've had a lot of clients recently realize that their rental amounts have been pretty outdated.

And I'd love a shot at earning your business.

Mortgage here. If you purchase and keep the rental you would qualify using remaing costs such as taxes and insurance but that would be offset by whatever positive income from the house on your 1040 tax form, if any.

If you do decide to pull equity out of the rental probably best to do after any purchase. Easier to qualify. Also probably better to have US address but not a requirement. That just makes qualifying easier.

Where are you getting valuation?
Seems like you need to keep rental but increase rent....

Do you need to pull from the rental equity to fund the down-payment on purchase of a new primary residence?

jja79 said:

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Do you need to pull from the rental equity to fund the down-payment on purchase of a new primary residence?

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No. Liquid funds available for 20-50% down.

380Ag said:

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Where are you getting valuation?
Seems like you need to keep rental but increase rent....

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I am in 77079. Valuation largely based on what I see other fully remodeled properties moving at in the area and recent data from my HCAD battle. Not sure if you are familiar with this part of Houston but it is essentially over off Memorial (south side) with direct access to Terry Hershey and SBISD schools.

Remember I am abroad and managing this thing from the other side of the planet. Rental is priced aggressive to keep it occupied and frankly keep my stress low situation would be different if I was back in Houston and could deal with it directly. I currently have it leased at $4.2k month which seems to be in the ball park with other properties in the area. Potentially if I got aggressive maybe could get up to $5k.