seannorwood09, Home Owner in Topeka, KS

Buying a Home fully to help pay off mortgage

Asked by seannorwood09, Topeka, KS Mon Apr 15, 2013

I have a mortgage of about $129,000 on my home and am thinking of buying a home around $100,000 paid in full to rent out to help pay the mortgage payment on my main home ($750) and eventually sell the rental home in the future. Do you think this is a good idea? Or should I just pay a chunk off my mortgage?

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6
I would like to clarify my point. I would suggest that investing in real estate is a lovely proposition. There are phenomenal margins and return to be achieved. I am only suggesting that when investing in ANYTHING, always consider what all of the options are, unless there is just one to consider. I think that you could use the cash now, to buy. You could finance a small portion of the purchase or the maximum amount, or none. That is my point. There are options for you, beyond paying cash for a home or in throwing the money at a mortgage you have, which may be one of few tax deductions you have. There is a ton of good advice, from all of these people. Have fun with it!
0 votes Thank Flag Link Tue Apr 16, 2013
I like to compare any form of investing to the structure of a tree. You can cling to the trunk for security reasons or you can venture out onto a limb where the fruit is. Rewards are rarely without risk, but choosing the right real estate advisor can increase your chances of success. Let me help boost you up the ladder to begin your climb.

Best wishes!
0 votes Thank Flag Link Tue Apr 16, 2013
I think you do neither A)buy a home with cash or B) pay a chunk towards a mortgage you already have. Reasoning is as follows: Money is cheap. REALLY cheap. You can get money for less than 4% over a 30 year period, fixed... no risks.. Of course, you will need to be able to service your debts, but you have cash to help you do that. What would your financial advisor say about you placing all of this cash into buying real estate? If you have that much cash and don't have an advisor, it may be time to get one. Most of the folks posting on this site are realtors and lenders. If you have 50K or 100K in cash, ask a financial advisor what could be done with that cash over 10, 15 and 30 years. Then, compare that to the costs of borrowing money. Just some food for thought before you take EITHER of those actions, I suggest this avenue be considered, every time, first.
0 votes Thank Flag Link Tue Apr 16, 2013
Sean,
The plan you are considering is excellent and one that you should pursue. If you have any inclination to build wealth, you are looking at the right options.
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HOWEVER....
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There is always a 'however.'
If you are not displined to work within a budget.
If you do not have an attorney on your team.
If you have no expereince in calculating real costs, repairs, maintainence and admin, this could be expensive OJT.
If you do not work with an accountant and have no home ownership experience, this could become a situation with a costly outcome.
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Many, many, many inexpereinced citizens have elected to build wealth through real estate options and have been VERY successful. You should choose to acquire the knowledge, skills and team members to increase the likelihood that this is but the first of many pruchases.
Best of success to you.
0 votes Thank Flag Link Tue Apr 16, 2013
I think it's a great time to buy, but I think part of the equation is your timeframe- how quickly you want to buy and sell that rental. If you're going to buy a rental and sell it again in a year or two, you'll run into capital gains taxes. While interest rates are so low, and if you plan to hold rental property for longer, you might even consider buying more than one rental if you like that income model. It all depends on your comfort with risk. Lastly, if your monthly budget isn't tight (it sounds like it's not) you might also look at refying your home to a 15 year mortgage with a lower interest rate and more aggressive amortization schedule, but only if you plan to stay in your home long enough to justify whatever closing costs might come with refinancing.
0 votes Thank Flag Link Tue Apr 16, 2013
Hi Sean,

That is the best way to build wealth in real estate!! Think of it this way. 30 years from now, would you rather have one house paid off or two? Once you figure out the answer to that question, the next question is 30 years from now, would you rather have two houses paid off or four?

My investors do exactly this and I assist them every step of the way. You should sit down with an agent of your choice who works with investors and can show you tax saving methods of doing this and has experience with working with investors.

You can start looking for properties on the web reference link below to familiarize your self with the Lawrence Kansas real estate market.

Thanks for your question and best of luck to you in building wealth through real estate!
0 votes Thank Flag Link Mon Apr 15, 2013
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