Renting out the house won’t work. The OP thinks he might get $2,500/mo for it, which would cover his existing mortgage payment, but not leave anything for rent for wherever he might move.
He could try putting the house on the market, just to see what the market is like.
Really, it comes down to increasing income (getting another job or taking in a housemate) or cutting expenses.
Take a good look at your expenses, as mentioned upthread. When you start breaking it down to what you need to live vs. what you’ve gotten used to (cable, a nice car, extra packages on your cell phone, eating out, etc.) you can probably shave a few hundred a month off your monthly budget.
But yes, you may have to defer your dreams for awhile.
If he can rent the house out for the mortgage payment and rent a small apartment for himself for considerably less then he will save money. Though he would still need to take into consideration taxes, insurance and any required maintenance costs during the tenants stay.
Without knowing where he lives it’s hard to predict what we would pay to rent somewhere else. But I would suspect that if he has a house of that size valued at less than $500k he could get a 1-2 bedroom apartment for $1,000-$1,400 for the next 2 years and save about $1,000 per month. That’s $24k he could put towards the principle. Along with other downgrades in his lifestyle to save more it could make a serious change in his financial status.
That small apartment isn’t going to house kids though - its still a ‘defer the dream’ decision.
As I see it, there are a few issues.
Free himself from a house with large mortgage that is underwater.
Desire to get married - with kids and a stay at home wife
Desire to not be tied to well paying - but soul sucking - cubicle job.
The three of these things aren’t compatible goals no matter what steps he takes. If he manages to free himself from the house, he’ll take a huge credit hit - which is going to make the whole “kids and stay at home wife” thing tough. Getting rid of the high paying/soul sucking job pretty much means that the wife is going to work.
He COULD, depending on his skill sets, let the house get foreclosed on (or stop paying the mortgage and convince the bank to short sale), pack up the fiancee and potential kids, and move to a place like Fargo - where the cost of living is pretty low, there are lots of pretty good jobs. Or even sell the house at a loss with a loan, and move to a place like Fargo. IF he’s living in a high cost of living area now where a $400k house is “normal,” he’d find a low cost of living region and an $80k salary a boon and be able to cover that loss on the house pretty fast - particularly if the fiancee works until the kids are born full time (or even full time plus) and maintains a part time schedule after kids.
But he said “we want to have kids in 2-4 years.” The small apartment is an option for those 2-4 years for him to save money and pay down the principle. When he’s ready for a family he kicks the tenants out (at the end of their lease of course and with plenty of notice) and moves into a house that is no longer upside down. Hopefully it has increased in value by that time and he will have more options for his future.
I don’t see any deferment of the dream, other than quitting his “soul-sucking job.” But let’s be honest, any job that pays $100k in this economy is worth keeping and nothing is stopping him from looking for something else now. He just can’t quit before he lines something else up, which isn’t advisable to anyone, in any job, in any economic climate.
Since he has two to four years, stay put. Why take the risk of a renter that trashes your house to get an apartment. Work your back end off for two to four years - with two adults working, frugality and a little economic luck (which might take more than two years, but probably won’t take much more than four) you should be in a place where you can owe less than the house is worth.
I’m having this conversation on another board where the person underwater has the benefit of hindsight - they rented the house they were underwater on - are still underwater on it, and now have a house that needs $30k worth of repairs from their renters in addition to being underwater. They’ve been renting a cheaper place…they’d like to buy a new (cheaper) house.
I don’t think he should automatically assume his potential renter will trash his house because someone on a message board had it happen to them once.
I know many people who own rental properties and don’t have those problems. Perhaps this person on another board should have been more careful in selecting their tenant.
Also, since he likely wouldn’t be moving far away because he’s keeping the same job, he could make it a point to stop in every few months to ensure the house hasn’t been destroyed.
He takes on the “risk” of the renter for the higher payoff. In four years he would be able to put at least an additional $40k into the house, even more if he really hunkered down. That $40k will make a huge difference in the long run, especially since his interest is changing in 5 years or so. At the end of the mortgage doing it this way could easily save him $80k.
I guess. Rental property is a risk. Maybe one you would accept. I wouldn’t on property I’m already underwater on. But I’m really conservative financially.
Just one warning. In many states a landlord tenant relationship confers certain rights to the tenant, and kicking someone out for being messy in the kitchen could turn out to be very difficult. I’d advise the OP or anyone to understand the law in their jurisdiction before starting on this.
She is going to stay working in the corporate world until we decide to have kids, and we’re turning the downstairs into an apartment. I’m also realizing what is important to me and buckling down at my job, being a man and not complaining or feeling sorry for myself anymore. I have beautiful future wife and look forward to starting a family with her!