Newbie Question ???

Question

I currently own my home. As I’m starting my real estate investment journey, would it be a wise decision to rent out my primary residence and seek a temporary rental for myself while I save money to purchase an additional property for investment?

Malcomb Stapel · Answer

That would be depend on how much cashflow you can generate from your primary as a rental versus what an apartment will cost you. For instance, if you make $500 in cashflow a month but you spend an additional $1000 for rent are you really ahead?

Patrick Roberts · Answer

If you're planning to go that route, I would consider buying a new primary rather than renting. The new property would be a primary residence, so you would get the best mortgage terms available for your particular situation, including relatively low downpayment options. You could even househack a duplex or multifamily property. Also, if you have significant equity in your current home, consider getting a HELOC or 2nd mortgage to pull cash out of the home for the new downpayment. Obviously you'll want to check the math on all of this before pulling the trigger.

If you decide to buy, please talk with a competent mortgage professional before putting any of this in motion. There are a lot of rules around using rental income to qualify for the purchase of the new property which may limit or change your options. I'm happy to help with this is you'd like.

As someone else mentioned, if you decide to rent a new property for yourself, you'll want to watch the net change in cashflow or you may be wasting your time and money. The increase in property taxes, insurance, and maintenance/wear and tear may erase all of your gains and more.

Jonathan Greene · Answer

Your home is an investment while you live in it. You don't need to move to feel like you have started your journey. Home ownership is often not looked at as an investment, but it almost always is an appreciation boom. You are allowed to enjoy your real estate.

It doesn't make sense to me to move out of the home you bought just to rent another house unless you were moving states.

Nathan Gesner · Answer

It could be. In my market, the average home price is $450,000. If I put 20% down, my mortgage payment would be around $2,500 and I am responsible for taxes, insurance, and maintenance. That's close to $3,000 am month to purchase the home after putting down $90,000 and closing costs. Meanwhile, I could rent a comparable home for under $2,500. In other words, it's much cheaper to rent in my market than it is to buy.

If your numbers are similar, you could rent out your primary, live in a rental for cheaper than a mortgage (especially if you downsize), and save up for your next primary.

Eric DeNardo · Answer

It depends on what the numbers look like. If you’re saving money by doing that with cash flow from your property, then yes. Make sure and get a 1 year lease in place. You can use that income to reduce your DTI and be able to qualify for a higher mortgage, if necessary.

Max Wilhite · Answer

Congrats with your first rental property you’ve come to the right place to learn everything you need to know about real estate from him very smart people. We know these forums whenever you have questions.

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