Reply to Buying $325k home on $100k HHI, for potential profit on sale in a few years (not in DC)

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Reply to "Buying $325k home on $100k HHI, for potential profit on sale in a few years (not in DC)"

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[quote=Anonymous]Our HHI is about $100k/year, and could be more like $130k whenever I decide to switch back from part time to full time work (I'm home part time with a baby now). We live in a mid-sized town in a moderately priced area, and our only debt is $200/month car payment and $100/month student loan payment. We have two kids in good public schools, so no monthly education expenses. We live pretty frugally, in general.

So we are looking at a potential investment property, and considering renovating it, living in it for two years (or 3, however long we'd need to avoid capital gains upon sale of the property), and selling. The profit potential is reasonably $75k-100k (possibly more, depending on what the market does between now and then; home prices have been rising steadily in our area). The overall cost of purchasing and renovating the property, however, would be about $325k. In a normal scenario, we would be looking at houses around $250k, for an ideal long term mortgage. However, this would be for investment purposes, sort of a long flip scenario. We are weighing if it would be worth having a substantially higher mortgage for 2-3 years in order to gain a nice profit at the end of it. We'd then use that profit to buy something in the $250k range, with a really substantial down payment, so that our monthly mortgage would be very low long term and allow us to save a larger portion of our salary in the long run.

I'm not sure if this is a crazy idea. Of course it's a bit of a gamble in a number of ways. The housing market could crash between now and then, but that seems improbable at the moment anyway. We could have a big emergency of some sort and have less cash reserve than usual (although we both have families we could turn to for a loan in an emergency situation). We could be more uncomfortable than we'd like to acknowledge now, with less discretionary income than usual. But it feels totally worth it for the profit potential. We have conferred with numerous real estate professionals as well as an architect and contractor, and are confident in the profit potential.

Is this completely insane? Or maybe worth the gamble? [/quote]

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