Which situation would you prefer:
a) you are 28 years old. you built a house 8 years ago, you’ve made it your home and it’s plently big enough for your family of four (although a bigger yard would be nice). With this house it is worth 3 times your mortgage, you can comfortably afford 2 times the minimum repayments and will own it within 8-10 years.
In 10 years you will be mortgage free with one home.
b) rent out the house you own (mentioned above) and receive rent $300 over the minimum repayments weekly. And buy a block of land 5x the size of the land you currently live on, build a new house but have a mortgage that will absolutely stretch you for the next 3-4 years until both your kids are at school and you can go back to full time work.
In 10 years you will almost own the rental and will confortably be able to afford the second house that you live in. You will eventually own 2 homes..
My issue is, do you struggle a little now for it to pay off in the future, or live comfortably and not have to worry about making repayments?
10 Replies
I would go with the first option. I'm sure the second option is probably better in the long run but way more stressful. You will be constantly stressed about tenants paying on time, work, kids at daycare and hoping nobody gets sick. I would stick with the first option until the kids are at school at least ☺.
Personally I would go with option a and look into increasing your mortgage repayments so you own your home outright sooner and then discuss what to do next.
Option b sounds great while everything goes right but rarely does it and all it takes is a couple of unexpected events and you're in some serious trouble.
Go with option A. Or put option A on the market and buy something new.
Rentals always have periods of being vacant. So there will always be times when you don’t have rent coming in. Also you’ve got to take into account paying rates, water and any repairs and upkeep on both properties. Costs of agents, and the risk of someone damaging your property. If it’s going to be tight it means you can’t affird it.
This was my first thought too. What if there’s a period of 3-4 months where your rental is vacant? Definitely stick with option A at this point. Pay that off then consider getting a second.
Having seen my aunts beautiful brand new home end up with thousands of dollars damage by tenants, I'd never rent out my property!
Being mortgage free in 10 years and being able to live comfortably until then, that is literally my dream come true.
B for me! 100%. We are looking at the same thing currently!
A. It’s big enough for your family and a small back yard is always doable.
I am all about the simple EASY life though. Give me stress and I am a mess. No thank you.
I’d look at selling current house in order to build a new one though. But having tenants in a home of mine doesn’t interest me
A for me. One of the main factors my first marriage broke down was due to financial stress. Wouldn't do it again!
I'd go with A personally.
A. Less stress = happier marriage and kids.