I am trying to buy my first property to live in, and also plan to make it a rental after the first year of occupying it. I am wondering if I should be analyzing potential properties differently than I would if I was buying it solely as a rental property? Any advice and suggestions are greatly appreciated!
@Dan Marr Have you thought about house hacking from the start and after the first year, you could move out and get into your second house hack and turn that first property into a full-time rental?
Regardless, I would analyze it as a rental from the beginning, but see if there are different strategies you could use to rent out the property. For example, does your city allow room rentals? What about short or mid-term rentals? You are not always bound to SFR, and having multiple options is always your friend. hope this helps
@Dan Marr if you plan on making it a rental, then you need to analyze it as a rental. Make sure that it will cash flow after you move out and find your next deal.
I would agree with Dave. Always think of your exit strategy with every property you buy. The last thing you want to do is move out and have negative cash flow every month.
Also, do you know what type of rental? STR vs LTR vs corporate housing fir travel nurses, etc.? Know the type of rental you want because you might be in a different area because of it. For example, if after a year of this home being your primary residence, you want to rent it out on Airbnb, you might buy near a major attraction like beach or mountains or a popular downtown area or wineries, etc. and you'll want to make sure it is zoned so that you can indeed make it a STR. However, if you want to turn your home into a LTR, you might want a SFH near a good school, etc.
Make decisions on your loan based on your strategy. I assume you will be putting no more than 5% down on this loan, so you'll have mortgage insurance. If you go conventional (which I'd recommend on a 1-unit if you can qualify), you'll have the option to pay MI monthly or buy it out upfront. Have your lender break down those two options for you and tell you what the break-even point is. Same thing with your mortgage rate. You'll have the option it buy it down, take the par rate, or take a lender credit for a higher rate. Decide on these things with your goals in mind.
@Dan Marr Have you thought about house hacking from the start and after the first year, you could move out and get into your second house hack and turn that first property into a full-time rental?
Regardless, I would analyze it as a rental from the beginning, but see if there are different strategies you could use to rent out the property. For example, does your city allow room rentals? What about short or mid-term rentals? You are not always bound to SFR, and having multiple options is always your friend. hope this helps
@Dan Marr make sure that the numbers work, but also make sure it is in an area that meets your investment strategy. Are you looking for pure cash flow or do you want something that is going to appreciate. Make sure that you look at all the investment variables, and you have questions ask!
All great advice within this thread. Super important that it financially makes sense when you convert to a rental. Evaluate multiple options from loan programs/rates/costs to ensure the best financial position as a rental property vs. primary residence. I would evaluate all local market projections (rent growth, new business, schools, etc) things you may or may not evaluate if just your primary residence.