Rent to Invest

If the rent is only "$95 cheaper" than it is actually more expensive when you take into consideration the tax benefits of home ownership rather than none with renting.

Edited: 06/26/2010 at 06:51AM

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Alton Dawsey

Real Estate Investor · Fairfax, Virginia

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Jan 07 '09, 02:36 AM

Bump.

Come on guys. Over 70 views but only one response. BTW thanks for the response nationwidepi.

Let's get some more points of view.

Edited: 06/26/2010 at 06:52AM

Chris A

· Wyoming

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Jan 07 '09, 02:51 AM

How about compromise and get a duplex where you want to live. Then you can easily manage it yourself and hopefully produce cash flow.

Edited: 06/26/2010 at 06:52AM

Account Closed

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Jan 07 '09, 03:15 AM

Originally posted by nationwidepi

If the rent is only "$95 cheaper" than it is actually more expensive when you take into consideration the tax benefits of home ownership rather than none with renting.

Maybe, maybe not. Often times the tax "savings" are offset with other costs, especially in this market, especially if held for the short term.

Alton, in 1984 when I started I did EXACTLY what you are describing. It wasn't really by plan I was already renting and started buying rentals and well, never bothered to move into one. I stayed in my apartment. Then I left the area, kept the rentals and bought a house where I wanted to live at that time.

There is one thing for sure, it would be much easier to "test" the theory by renting where you live and buying rentals for cash flow first. If that did not work out it would be much easier to buy where you are investing and move in than it would be to do the reverse.

Edited: 06/26/2010 at 06:52AM

Tim W.

Real Estate Investor · Indiana, Indiana

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Jan 07 '09, 03:55 AM

Alton - it's very feasible and often smart. It's basically REI triage.

Edited: 06/26/2010 at 06:52AM

Don Rice

Real Estate Investor · Henderson, Texas

35 posts
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Jan 07 '09, 04:23 AM

1. Why do you not want to live in that neighborhood?

2. What would you be investing in with your $1200 yearly cash?

I've heard others mention this strategy, Peter Schiff being one, but they usually mean they're investing in the stock market. Personally, not feasible for me. The difference in interest rates between a personal home and a investment home should make that decision easy.

Two of my three rentals are houses I lived in for a while.

Edited: 06/26/2010 at 06:52AM

Alton Dawsey

Real Estate Investor · Fairfax, Virginia

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Jan 07 '09, 04:53 AM

Originally posted by Don Rice

1. Why do you not want to live in that neighborhood?

2. What would you be investing in with your $1200 yearly cash?

I've heard others mention this strategy, Peter Schiff being one, but they usually mean they're investing in the stock market. Personally, not feasible for me. The difference in interest rates between a personal home and a investment home should make that decision easy.

Two of my three rentals are houses I lived in for a while.

First of all thanks to everyone one for the responses.

Don,

To answer your questions.

1) I want to live in a specific area to aviod traffic and be close to work. I just can't handle a 2 commute to and from work.

2) I would re-invest the money into other RE by saving and buying other rentals. I have enough stocks in my portfolio.

Thanks again for the help everyone.

Edited: 06/26/2010 at 06:52AM

Dan Estrada

Real Estate Investor · Bartlett, IL

45 posts
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Jan 07 '09, 05:23 AM

something that has been missed here is the opportunity cost. If you have credit tied up in a home you are occupying it isn't available to use investing and has a cost to it. How much cashflow and equity can you buy in your rental investment area with the money you would be spending on a home. You can depreciate as well as cashflow the rentals and that should easily mitigate the interest deduction on a home if you are wise.

Edited: 06/26/2010 at 06:52AM

Alton Dawsey

Real Estate Investor · Fairfax, Virginia

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Jan 07 '09, 05:50 AM

Originally posted by Dan Estrada

How much cashflow and equity can you buy in your rental investment area with the money you would be spending on a home.

This is a good point and something I have thought of. Just to give you an example, I'm looking in the Northern Virginia area. Where I want to live is in the $200K range; whereas, where I would invest is in the $50K range. Or better yet, I could invest in my home state of SC for even less than $50K in some places.

Edited: 06/26/2010 at 06:52AM

NC Mark

Real Estate Investor · North Carolina

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Jan 08 '09, 04:01 AM

Personally, I'm a conservative kind of guy. I say live below your means as much as possible and plow everything you can into your future.

Edited: 06/26/2010 at 06:52AM

Alton Dawsey

Real Estate Investor · Fairfax, Virginia

26 posts
1 award
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Jan 08 '09, 04:17 AM

Originally posted by Nc Mark

Personally, I'm a conservative kind of guy. I say live below your means as much as possible and plow everything you can into your future.

So which are you saying is the best option? I too am a live below your means kinda guy.

This why I am heistant about buying where I want to live, because the price is in the range of $200K.

Edited: 06/26/2010 at 06:52AM

NC Mark

Real Estate Investor · North Carolina

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Jan 08 '09, 05:44 PM

Rent where you want to live and buy for cash flow.

Keep in mind your first rental is many more times important than your tenth or twentieth in that you _must_ get it right to keep going.

Good luck.

Edited: 06/26/2010 at 06:53AM