I have a personal finance question.  

Background on my financial status:
-I'm short about $300/mth after all bills and day to day living expenses are paid.
 (I have some payroll deductions that will end in Jan. which will
resolve the  shortage)
- $25k(after tax) in company stock available.
- $8k in credit card debt, avg 10% rate.

I would like to have a home that I could rent out down the road and I
am struggling with whether or not to sell this house and purchase a
less expensive home ( fixer upper for under 100k ), or to use my
company stock to pay down on the equity loan and keep the current
home.  I live in an area that has seen a 10% gain in property value
each year for the past 10 years.

I own a home that has two loans against it:
$95k (5.5% for 15yrs @$900/mth) first mortgage
$54k (11.5% for 20yrs @$580/mth) equity loan

The house has recently appraised for $150k.  

What I'm looking for is someone with a solid financial background to
give me the best course of action.

---

Clarification of Question by shugt23-ga on 27 Jun 2005 07:03 PDT

I am 35.  In the long term I want to have 2 or 3 small homes for
rental properties. I would like to build my dream home and have it
paid for by the time I retire, which I hope I'm able to do by 60.  My
idea is that I can buy a fixer upper, live in it long enough to get it
in shape then rent it out, and buy another small home and do the same.
 At that point build my dream home.

As for the stock, they are in the form of stock options that I get
annually. They are open to exercise 12 months after they are issued to
me.

Here is my suggestions and things depend on your long term plan.  You
may want to state your age and your finacial goals as well.
If you stay in your house I suggest that you consolidate and first
mortgage and home equity loan.  A 11.5% loan is a bad bad thing to
have for 20 years.  When I stay, stay I mean stay.  You will have to
pay some fees to get another mortgage but you will not have a 11.5%
loan.  You can get that down to $900 for 30 yr note.  With that
savings, pay that credit card off.  It will kill you.  This also frees
your cash flows up.

Is the company stock available part of your retirement?  When you say
after tax that concerns me.  Why do you want so much risk?

One probem I have buying a new house is this.  It will cost you to buy
and sell.  The commissions and fees will kill you.  What do you get
from it.  A house you have to sink money in.

Good Luck
Paul

Here are the hard facts.  You are in a bad situation.  You are cash
negative because of your debt situation.  I understand your long term
goals but you need to get your finances together before you can get
there.

No matter what you do it is going to cost you.  Here are your options.

A.  Keep current house and rent latter.

1.  Selling your home is going to cost you roughly around 5-6%
commission on top of your sellers fees.  So we will say a total of
$10,000 of which you have no equity in your house.  Your house
mortgage is $149,000 and your house value is $150,000.   Selling you
house will cost you $9,000 assuming you sell it for $150,000.  Good
buy stock options.  Then you need a downpayment on your next one.
2.  If you keep your house, I suggest that you consolidate and first
mortgage and home equity loan. Get a 30yr note; hopefully you have
good credit and you can get a note at a rate of 5.5%.  Here is why. 
You need the cash flow.  You are cash negative paying high price debt
i.e. credit cards and an equity loan.  I expect that you will need to
pony up some cash to do it.  I do not see how you got a $54,000 equity
loan by the way.  No creditable bank loans that much money when you
fair value and debt value are the same.  Figure out if the new note
and taxes/insurance covers the expected rental value.  I doubt it now
thinking about.

B.  Sell House and buy a cheaper one
1.  Selling your house will eliminate your equity loan and current
note but it will cost you $10,000 ish in selling you house.  Then you
need to put down at least 5% plus fees on your next house.  However,
you will have a lower note which you need.

I do not see a big savings buying 100K house from selling a 150K
house.  You are losing a lot of cash fees and commission.

Personally, I consolidate my loan to a 30 yr note. That frees up cash
flow.  You can allows pay extra on your principal.   I would then sell
some of my stock and pay off the credit cards.   If you are determine
owe rent houses, at some point I would rent your current house out and
move to a cheaper house and do the same.