Should You Buy Your Own House or An Investment Property First?
My brother just graduated from college, got a job, and is getting out into the “real” world. The other day he called me up and told me he was going to start looking to buy a house, and since I know a thing or two about real estate, he asked me if this was a good idea.
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In short, I told him no. First off, I told him instead to buy a rental property or try some type of investing such as wholesaling real estate. With the amount of money he’s making (which isn’t much) he shouldn’t go buy a house which he can barely afford and then have no money left over for investing (of any type).
What he should do is buy a multi-unit and live in one of the units . . .
Or buy a quality rental property, or as I just mentioned, do some wholesaling. In the mean time, while he’s making money from these ventures he should be living as cheaply as possible.
In other words, unlike the majority of (broke) Americans he should delay instant gratification and make a bunch of money from real estate investing so he can put a significant down payment or even pay cash for a house a few years from now.
When I was a new investor I lived on next to nothing while plowing all of my money into my business. In fact, I lived in some real dumps where even my friends didn’t like to come visit (But I didn’t really care, I was planning for the future.) Looking back, it saved me a ton of money, which I put towards marketing and allowed me to substantially grow my business to the point it is today.
So, if you happen to be new and just starting out, I would avoid buying a house until you have some success as an investor. As many people will tell you these days, owning your home is overrated. I realize it’s the American dream and all, but to me and many other investors it’s just four walls and a roof and a great way for us to make money.
If it weren’t for my lovely wife I wouldn’t care where I lived and I’d be fine in some small condo. (That’s probably true for most guys I know, so I guess its good we have women or there would be no single family houses in the world.)
One last thing. Let's say you do have $10,000 saved for a down payment on a house. These days that's nothing and most likely you won't even be able to get a loan with that amount of money. But if you invested that in marketing (letters and postcards), networked at local REIA meetings and went out at 6am and passed out flyersâ¦.
Then you could turn that $10,000 into as much money as you want. There are many investors (myself included) who started with just a couple grand and parlayed it into hundreds of thousands of dollars.
Photo: Matthew Rutledge