The Question: Am I crazy for considering buying two houses (and stretching our finances)?

(This question is based on a post I recently came across.)

Are we crazy for considering this?

So here is our situation.

I have about 100k income wife has 145k. Only debt is car loan at $500 a month, and mortgage which is up for renewal in Nov, $231k left owing. Originally bought in Nov 2015. House value is approximately $1MM. We have a finished basement, but not a legal rental, although we are thinking of converting it to a rental (studio). Initial estimates seem to be around $10k to 15k to convert and legalize.

We are considering renting out the existing house, and buying a larger home, thinking between $1.2-1.4MM. Our mortgage person said it would be tight but we could do it. We would have to get about $4200 ($3000 for house and $1200 for basement) in rent, which is doable in our area (Brampton) if we rent the house and basement.

Our mortgage agent said we would have to refinance the existing home to 25 or 30 years. It would be basically neutral or slightly cash flow. Is this worth while? Obviously housing has really come down, so thinking of it from this angle.

My Answer:

I strongly recommend you and your wife getting clear on your goal first. Once you know your goal(s), the decision itself becomes a lot easier.

Start With Your Goal - The Goal Impacts Your Approach

From what you’ve written, why you are considering this isn’t obvious. And your goals will shape both the questions you ask yourselves and how you use the data you’ve collected.

For example:

If your goal is to become landlords, you might ask:

• Is this the best way to start or grow a rental portfolio?
• Is your current home in the right location and setup to attract tenants?

If your goal is to grow your net worth, you could ask:

• Is leveraging into another property the best risk-adjusted way to build wealth?
• Would other investments (stocks, index funds, etc.) offer more growth with less complexity?

If your goal is to grow your family in a bigger home, you might ask:

• Is now the right time to stretch financially?
• Would the stress of managing tenants and cash flow interfere with family life?

These are just a few examples; your actual goal might match one of these, or it might be something completely different. The point is that once you clearly define your goal, it changes the way you evaluate your options.

Clarity Guides Your Path Forward

At the end of the day, your path to finding the right decision for you and your wife comes down to clarity:

• What is your goal(s)?
• What is her goal(s)?
• And most importantly, what is your shared goal(s) as a couple?

Once you are clear on your goal(s), the path forward gets much clearer.

You’ll either feel ready to make the decision with the info you have, or you’ll understand what additional information or advice you need before moving forward.

Best wishes whatever you decide! If you’d like to dig deeper into this situation, contact me, I’d be happy to help.