We are currently renting and since houses/location that we would like to live in are priced beyond our reach for now, I would like to just jump straight into investing in other more affordable areas around us.
Are there any disadvantages to my plan that I should further consider? Such as, in terms of taxes or getting loans, any tax disadvantages to not owning a primary residence? Is it harder to get loans if the banks know we are buying for investment as opposed to primary residence?
Buying a primary residence with the intention of later turning it into a rental is the lowest risk way to learn the ropes in my opinion. You are essentially your own tenant, your own contractor, and your own property manager in the beginning, and that is a great, low risk way to learn hands on. You don't have to buy your dream home in your dream location as a first property ... this concept seems to have been lost over time, but back in the day there used to be this great concept of a starter home, which was a place to sacrifice a bit, learn the ropes, and build up to your dreams.
On the other hand, you could buy a rental 1st, but that would be much riskier in my opinion since you would not have as solid of a base of hands on experience or financial base as you would by buying your primary first and then turn it into a rental to buy your next home later.
I speak from experience, and now have a nice portfolio of cash flowing single family homes in nice neighborhoods in Southern California. If I can do it, then you can do it!
@Jake Thomas, Wow! Congratulations on your 4 rental properties! If you don't mind me asking, did you use your own cash for all the downpayments of the 4 properties, or did you use the BRRR method that Brandon spoke about? Also, thanks for heads up on the DTI thing, I actually did forget that the rent we are paying count as debt :-(. Think we will probably try to speak to some lenders too and see how far/how much we can get.
@Casey LaValle, thanks for sharing your analysis. I am going to try driving around Mt Lebanon a little more the next couple of days to get a better feel too.
I am not familiar with your area, but would it be possible to consider purchasing a multi-family property? That is what my Fiance and I are planning on doing here in SoCal. The prices here are very high. So what we plan on doing is purchasing a 3 or 4 plex, live in one unit, and rent out the rest.
If we do it correctly we should pay close to nothing (assuming we can keep the units leased), and in some cases I've seen that we can make a little money (not including for capex, repairs, and vacancies). It isn't what we would like to do obviously, but it makes the best financial sense for us now. In the event that a price correction occurs in our area, we should have adequate savings for a single family for ourselves.