Spreadsheet w/ calculations here – https://imgur.com/a/NDLwyDB
First, I understand there are MANY assumptions here, but I did try to estimate on the conservative side. I factored for rent increases at 4.5% per year, property value increasing at 5.5% per year, and property tax increasing at 2.5% per year.
Equity in my current house is $345k w/ a market value of $575k ($230k left on mortgage)
New house is $600k and will put down 20% minimum ($120k).
Liquid cash = $40k (+ 60k equities that can be quickly liquidated if needed)
The original plan was to sell the old house and roll $140K into the new one and use the remainder to invest in equities. Now, given how hot the Austin housing market has been and the great location of our current property (5 minutes from downtown w/ private rooftop deck w/ downtown views) I am wondering if it might make sense to keep this house, pull out $120K via HELOC for the new home down payment, and rent this place out for another 8 years (to 2030). The house was built in 2018 so it would be 12 years old by that time and likely need HVAC replacement etc. before selling.
Running the #’s for what I could rent this house for it would just barely break even in the first 3-years, and then from years 3 through 8 it would slowly build profitability, factoring for rent increase of 4.5% per year. I used an assumption of 5.5% property value growth year over year and estimated that my beginning equity in the house would be $220K (with the HELOC added onto the existing 230K mortgage) and by year 8 it would be roughly $600k. I am anticipating inflation running a bit hotter than usual for 2022 through 2025 (3% to 4% per year), especially if Biden’s $4T infrastructure plan passes, hence why I am more enticed than usual to load up more heavily on debt.