Real Estate Investor · Tacoma, WA · Member since 2016 · 7 posts · 0 votes
Hello PB family.
I live in the Seattle area and want to buy investment property in Houston. With today’s interest rates I would qualify for about a 500k loan in my area to purchase a primary residence. I am trying to figure out the most profitable way to utilize my cash and credit availability to capitalize on the low rates. Should I buy my personal residence or investment property first?
I’m thinking that credit would be better utilized on an investment property instead of a personal residence right now. My current thought is to rent my personal home for the next year or two and use my credit to buy one or two income producing properties over the next couple of years. And hopefully buy a home when I have more investment income. Any feedback would be greatly appreciated. Thank you.
Real Estate Agent · Portland, OR · Member since 2020 · 278 posts · 136 votes
4y
Hey
First off, congrats for being in a place where you have so many options!
Do you want to be the most profitable in the short term or the long term?
1) Investing in rentals will produce cashflow more short-term. If you are wanting to supplement your income with rental income more immediately then I think this would be the way to go. Usually, when you invest in more cashflow markets you are not getting as much appreciation and rent doesn't go up as much over the long haul. You will also have to manage from afar, which isn't a bad thing, but it will probably be a bit harder to make sure you have the right team to make sure your investments don't become money pits.
2) If you invest in a personal residence it will most likely appreciate more in the long-term especially in the Seattle market area. Just like Portland, that is much more of an appreciation market than a cash-flow market. You can then use the equity gained to then invest more in cash-flowing properties. This is going to be a longer-term play but the price of buying a home in Seattle will most likely never go down that significantly given the economic drivers.
3) Why not do small multifamily and you use as a primary residence? There are usually lower down payment programs where you are able to leverage these low rates. The rents from the other units would count towards your DTI ratio and can usually increase how much you can be pre-approved with.
I hope this gives you a bit more to chew on. DM me if you want to chat any further!
Real Estate Agent · Portland, OR · Member since 2020 · 278 posts · 136 votes
4y
Hey
First off, congrats for being in a place where you have so many options!
Do you want to be the most profitable in the short term or the long term?
1) Investing in rentals will produce cashflow more short-term. If you are wanting to supplement your income with rental income more immediately then I think this would be the way to go. Usually, when you invest in more cashflow markets you are not getting as much appreciation and rent doesn't go up as much over the long haul. You will also have to manage from afar, which isn't a bad thing, but it will probably be a bit harder to make sure you have the right team to make sure your investments don't become money pits.
2) If you invest in a personal residence it will most likely appreciate more in the long-term especially in the Seattle market area. Just like Portland, that is much more of an appreciation market than a cash-flow market. You can then use the equity gained to then invest more in cash-flowing properties. This is going to be a longer-term play but the price of buying a home in Seattle will most likely never go down that significantly given the economic drivers.
3) Why not do small multifamily and you use as a primary residence? There are usually lower down payment programs where you are able to leverage these low rates. The rents from the other units would count towards your DTI ratio and can usually increase how much you can be pre-approved with.
I hope this gives you a bit more to chew on. DM me if you want to chat any further!
Specialist · Newberg, OR · Member since 2009 · 93 posts · 71 votes
4y
Completely agree with especially #3 by @William Sing - Definitely an option worth looking at, combing buying a personal and investment property in one. It doesn't get you an investment in an outside market, but it does kill two birds with one stone and at least gets you an investment property. It should lower your monthly housing expense as well, which will likely put you in a better position for purchasing another investment property sooner.
Realtor · Seattle, WA · Member since 2020 · 36 posts · 19 votes
4y
Agree with both of the above, but that price point will be tough in the Seattle area. I'm happy to help you identify some opportunities if you'd like, but you may need to look North or South of Seattle to get into something in this market!
Property Manager · Katy, TX · Member since 2015 · 1k+ posts · 1k+ votes
4y
Hey Kelton,
I would purchase a primary residence in Seattle that will be a solid rental later on with 0-5% down. Then over the next year look for an investment property to purchase. If you haven't found a solid investment property after living in your primary residence for a year then I would buy another primary residence and rent the first property.
Risen and repeat until you reach your goals.
I see too many investors try to rush to get a deal. Take your time and find the investment that will get you to your goals.
Realtor · Seattle, WA · Member since 2019 · 117 posts · 165 votes
4y
Hey Kelton,
I agree with the posts above. The tough thing about true zoned multi families is that there is a premium just for being called a "multi family". Usually multi families are zoned for larger projects which attracts developers who drive the price up. Another option is buying a single family with an ADU which allows you to househack in the same way as a multifamily(you could even short term rent the other unit for typically double your projected long term rents). If you are looking outside Seattle in Tacoma or Everett there are still a lot of good options in the 500k price point. If you don't plan on moving in the next few years I would focus on your primary residence. Build some equity and take a HELOC to buy your next investment. With the way homes have been appreciating it won't take long in this market. Let me know if you have any questions about the Seattle market. Happy to help.