My spouse and I are at a crossroads with our real estate investments and would love some input from the community. Here's our current situation:
* **Current Home:** Purchased for $1.1M in May 2020 with a 2.75% interest rate, 20% down. Current value is around $1.4M. Potential rental income is $4500/month, but expenses (mortgage, taxes, HOA) total $5250/month.
* **Rental Property:** Bought for $450K in May 2023 with a 5.5% interest rate, 25% down. It's now breaking even with a cash flow of $900/year.
We're considering two options:
**Option A: Buy Another Rental Property in a MCOL Area**
* Home value: $520K
* Interest rate: 6%
* Down payment: 25% from selling stocks
* Cash flow: Negative $3000/year initially, expected to break even by 2027
**Option B: Upgrade to a Larger Primary Home in VHCOL Area**
* Home value: $2.2M
* Interest rate: 6.75%
* Down payment: 40% from selling our current home ($700K proceeds, $620K in hand after taxes/fees) and some stocks ($270K)
* We have $100K in cash and $1.1M in stocks
**Our considerations:**
* We're comfortable in our current home, which could work for the next 2 years with a baby. We are not pregnant, but we're concerned about being stuck in a smaller space longer than we'd like.
* New home construction in our area might increase our current home's value, making us hesitant to sell.
* The rental market in the MCOL area is heating up, presenting potential for growth.
**Questions:**
1. Which option seems more financially sound given our current financial status and market conditions?
2. Should we consider the potential for our current home's value increase before deciding to sell?
3. Is there a way to save more in taxes, I own the primary while co-own the rental with my spouse.
4. Any other factors or strategies we might be overlooking?
Thank you!