Being a landlord isn’t for everyone — but it might be just right for you.
When it comes to buying a new home, most people decide to trade up to gain additional space, live in a better neighborhood, move to a home in better condition — or any combination of these. For many home buyers, particularly those with a good deal of equity in their current home, it begs the question: Do I have to sell in order to buy?
Real estate is always meant to be a long-term hold. Building equity and passive income are why so many people turn to real estate to build wealth. If you can afford to keep your home while purchasing another, do so.
If you want to make your first foray into real estate investing, you’ll need to take several steps. Meet with a mortgage and real estate pro, and do some early research to determine if owning two homes is feasible for you.
Determine your current purchasing power
If you were to sell your home and take out that equity, how much can you afford to spend on a purchase, and what type of home will that get you? Check with your real estate agent and go to open houses to see what you can buy for your money.
This number is going to be high because you would be putting all your eggs into the new purchase. If you choose to keep the old home as a rental, you may not be able to buy your dream house.
Understanding what you are giving up will help inform your decision of whether you want to be a landlord.
Calculate your purchasing power without that equity
If you keep your old home, you will likely have to compromise on your new home’s location, size or condition. Go check out homes at lower price points to understand what you will get for the money.
If you are open to becoming an investor and building wealth in real estate, this compromise won’t be a big deal. But if you aren’t comfortable with your purchasing power without your existing home’s equity, then it might not make sense for you.