Need advice on our situation

What should we do?
We are looking to buy our first house, but also looking to invest. Will buying a house first affect our investment opportunities(this will be with an agent and bank loan). If we invest first we'll be using our credit and the banks might not approve us for a house. Please provide any ideas or suggestions.

Edited: 06/26/2010 at 07:47AM

J Scott

Real Estate Investor · Atlanta, Georgia

6085 posts
66727 Influence
13 Awards

Icon_minipost Mar 31 '09, 09:13 AM

If you purchase an investment property first (and it's a smart investment with decent cash-flow), you should be able to use the income from that investment property to offset (most of) your costs, and return your debt-to-income to (close to) where it was before you purchased the property. This would allow you to purchase your primary residence afterwards.

On the other hand, if you purchase your primary residence first, your debt-to-income ratio increases, with no ability for you to bring it back down using investment income. This would make it more difficult to then purchase an investment property.

So, of these two situations, I would recommend the investment property first, and then the primary residence.

That said, there are other things to keep in mind:

- I'm not sure if the tax credit (the $8K) would be available when you purchase your primary residence, if you first purchase an investment property. That's something to look into;

- My scenario above is highly dependent on the specific financials related to: the investment property, the primary residence, and your current financial situation. Depending on all the numbers, this may or may not work out the way I said. So, run some scenarios with your mortgage broker;

- Have you considered purchasing a multi-unit property (duplex, triplex), living in one unit, and renting the other(s)? That's another option to both gain a primary residence and buy investment property simultaneously.

Edited: 06/26/2010 at 07:47AM

Billy Campana

Real Estate Investor · Los Angelese, California

8 posts
38 Influence
3 Awards

Icon_minipost Mar 31 '09, 12:38 PM

Thank you J Scott!

This is exactly what I was thinking about the scenarios.
It's just good sharing the same thinking with others that are more experienced than myself.

Billy

Edited: 06/26/2010 at 07:47AM

Dan Reedy

Real Estate Investor · Kansas City, Missouri

2 posts
22 Influence
1 Award

Icon_minipost Mar 31 '09, 01:03 PM

talk to your loan officer 1st.
there are a lot of lenders that wont finance an investment property if you do not own your primary residence.
the multifamily idea is a good one.
the other scenario is to buy a primary residence now while prices are low, get your tax credit and leverage your equity and tax credit to get into an investment property.
always consult your tax man and your lender before making a jump.

Edited: 06/26/2010 at 07:47AM

Jack Fremont

Developer · Frederick, Maryland

17 posts
63 Influence

Icon_minipost Apr 02 '09, 11:52 PM

Billy, I hate to get all Dave Ramsey on you but I suggest you build up some cash before making the leap to investing. As countless people can attest to in this economic crisis, just because you qualify for a loan doesn't mean that it's a good idea. If you don't have cash, I think becoming someone's birddog is a great way to learn the business without risking anything but your time.

Edited: 06/26/2010 at 07:49AM