Can I buy my first investment property while still renting?

Question

Hey there!

Mortgage rates make buying a permanent residence painful and costly... I live in central Oregon, a HIGH cost of living area...

I live in a great apartment complex and rents are at least $500/mo lower than a typical mortgage here.

I am thinking about buying an investment BEFORE my permanent residence to keep my monthly CF and savings high.

What are the pros and cons? What should I keep in mind?

Thanks for your expert help!

Nathan

Brad Hammond · Answer

Hi Account Closed, I think it makes more sense to occupy your first property.  You can put less money down and have a lower interest rate.  If you can't make the numbers work, can you make extra money with a side hustle?  Or possibly get a roommate?  At least you'll be in the game instead and making money on appreciation and tax breaks.

Karen Chow · Answer

Hi fellow Oregonian! It is super expensive here, isn't it. I have a primary, and just researching and learning about buying my first investment property.

Account Closed · Answer

Same here! Will be tough, but I know they exist!

Account Closed · Answer

Thanks for this detail! Looking into house hacking as well...  Seems to come with its strong advantages.

Alan F. · Answer

Live in flip/house hack? 3/1 where you can add a bath? Add sq ft? Pop the top? Liquidity and value add are the way forward.

Benjamin Aaker · Answer

I like that you are running the numbers, but usually it's best to own a primary residence. There are many benefits beyond the mortgage.

The biggest is equity. Right now, you are building equity for your landlord (as a landlord I thank you), but with a primary residence, you build that for yourself. Have a look at an amortization schedule for a new house and subtract the principal payment from each moth when comparing it to your rent payment. Also keep in mind that your principal payment increases every month you have the mortgage. That'll give you a more apples-to-apples comparison.  Also, there's a big tax benefit from paying your primary home mortgage that you are missing out on when you rent.

I totally understand wanting to get started investing and I applaud you. Just make sure you consider the things above before you do. But wait! There's a better way - house hack. Buy a 4 plex and live in one. You get to be a landlord, build equity, get tax benefits, and get an FHA mortgage. It's great! You are in a perfect position to do this. Let us know what you decide and best of luck.

AJ Exner · Answer

Hey Nathan,

A lot of the private/Hard money lenders that I work with do not require that, so depending on your strategy it shouldn't be an issue.

That sounds like great idea though, it could set you up nicely to hopefully save up for a good primary residence.

Would love to connect and talk through the strategies financially if you are interested!

Grant Schroeder · Answer

Welcome @Karen Chow and Account Closed!

Account Closed · Answer

Sounds like it's possible to buy investment first, but probably more efficient to work on owning my primary. Appreciate the note on tax breaks. Didn't consider that.

Thanks for the help, all!

Can I buy my first investment property while still renting?

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