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Old 03-20-2012, 12:17 AM
 
181 posts, read 634,869 times
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My house is worth about $280000. If I pay down about $42000, I will get a low mortgage interest. My mortgage will become 15 yrs instead of 30 yrs while monthly payment will remain the same. I am also thinking to buy a $150000 rental with the $42000 as down payment. Arizona rental market is great.

Which route is financially better off ? Thank you for you suggestions.
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Old 03-20-2012, 06:47 AM
 
Location: Simmering in DFW
6,954 posts, read 20,513,650 times
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If you refinanced the house at 30 years and rolled the closing costs in, how much will it decrease your payments? Just curious.

You need to find a few online calculators that help you understand the tax implications of these transactions. So much depends on how many years you will be working between now and retirement, the effect of both rental expenses and income on your taxes, the stability of your income flow and how much you have in reserves for emergencies. If the $42K is all your savings, I wouldn't buy rental property.
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Old 03-20-2012, 03:53 PM
 
Location: Louisville KY Metro area
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On the surface, I would buy the rental property. Let the profits of that second property more than make up for the savings of the home mortgage.
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Old 03-20-2012, 06:35 PM
 
Location: Baltimore
1,759 posts, read 4,643,718 times
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Without any rental market information It's difficult to give an accurate assessment. More than likely I would stay leveraged and buy the rental, thus increasing my net worth and adding income.
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Old 03-20-2012, 06:46 PM
 
Location: Salem, OR
14,579 posts, read 35,077,741 times
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Quote:
Originally Posted by davecj View Post
Without any rental market information It's difficult to give an accurate assessment. More than likely I would stay leveraged and buy the rental, thus increasing my net worth and adding income.
Agreed. If you can get a ROI that beats your interest rate on your home, then it probably makes more sense to buy the rental. At least out here $150k for a rental is hard to make pencil out. Not sure about your market though.
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Old 03-20-2012, 11:12 PM
 
181 posts, read 634,869 times
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Thank you all for your answers. It makes sense to buy a rental. ROI for rentals will beat the interests
I will save for 15 years mortgage.
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Old 03-21-2012, 04:19 AM
 
6,001 posts, read 9,521,649 times
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What monthly rent can you expect? What is the employment base in your area?

Remember you will be soon competing with the syndicates that will be buying bundles of foreclosed houses cheap and renting them out. The supply and demand could change drastically.
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Old 03-21-2012, 07:50 PM
 
Location: Orlando
24 posts, read 106,430 times
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If you have never owned a rental property before, being a landlord sucks. I would put that money towards your primary residence and finance at 15 years. Dont try to be too greedy, it might bite you in the butt down the road!

Once you have paid off your own house, then it might be a option to take on a rental property.
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Old 03-21-2012, 08:23 PM
 
Location: Louisville KY Metro area
4,824 posts, read 13,235,739 times
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Quote:
Originally Posted by Amaro View Post
If you have never owned a rental property before, being a landlord sucks. I would put that money towards your primary residence and finance at 15 years. Dont try to be too greedy, it might bite you in the butt down the road!

Once you have paid off your own house, then it might be a option to take on a rental property.
I agree, being a landlord stinks big time. Own the home and hire a professional management firm. They'll make you more than the commission they cost you.
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