Rent appt or buy house?

Question

Christopher Giannino · Answer

@Stefanos Koursaris would you and your fiance consider house hacking a small multi-unit (2-4) for a year or two?  If you were to go this route, you can buy a 2-4 unit and live in one of the units and then have the other units pay for all or most of the mortgage, taxes and insurance.  By doing this, you'll be able to reduce your living expenses which can be used to save up for another investment or used to buy a nicer primary residence.  I'm sure your fiance won't think its ideal but if you guys were to "suffer" for a year or two it could potentially set you guys up and pay huge dividends later on!

Jasmine Benford · Answer

Househacking would be the way to go! I am looking to househacking in the Baltimore area as I am new to the area, still trying to learn and feel my way around the city! I hope that your fiance supports this as I am sure (from reading BP forums and listening to podcasts) this will help build your (and hers) portfolio! Happy investing!

Christopher Giannino · Answer

I definitely hear where you're coming from because I'm going through a similar situation with my gf.  Some people just can't see the full picture (which is perfectly ok) but I think if you're willing to sacrifice a few things now that will then pay off in 5 - 10 - 15 years when you will have built up a nice portfolio of rental properties where both you and your fiance won't have to work anymore, it'll be worth it.

Just as a FYI.. once you get above 4 units it is considered commercial which changes things a bit.  So just make sure you do your research on the differences between residential and commercial financing along with the many other differences.   Best of luck and let me know if you have any other questions!

Justin Owens · Answer

@Stefanos Koursaris the hard thing about buying a home to be a primary residence and then convert to a rental is that as a couple generally you two will want something different to live in that what you would want as a good rental. If you can set aside what you want in a home (for the time being) and look at the acquisition purely as an investment that will soon be a rental then move forward with it. That's the ideal.

Some primary residences do end up being good rentals but most don't. A coworker of mine is renting out his previous primary residence and he is upside down $100 a month just on the mortgage/taxes/HOA. He pays CAPEX and maintenance out of pocket. That's no way to invest and even worse way to start an investment portfolio.

Our first two homes (condo and SFR) were both fixer uppers that we put a lot into and rented out for a bit until the boom drove prices up and we sold. We got lucky on timing but we definitely didn't run any rental numbers to see what we might be cashflowing after we moved out. If I could go back now I would do that. Since you are a pro member use the calculators here and run numbers as if it will be  a rental and see how it looks. If the numbers work as a rental and you buy it to live in for a while, taking advantage of FHA or other low down payment programs all the better that you didn't have to accumulate 20% for an investment loan.

Just some thoughts.

Jasmine Benford · Answer

@Michael Cohen understanding! thank you!

Michael Cohen · Answer

@Jasmine Benford - As a lender, I couldn't give advice as to which areas are better than others. I just help you structure the loan for your priorities.  :)

Jasmine Benford · Answer

@Michael Cohen thanks! I have heard so! Do you have personal experience in house hacking in Baltimore? I started a forum, may you provide some insight? I would appreciate it!  https://www.biggerpockets.com/forums/690/topics/453754-house-hacking-in-baltimore-city

Michael Cohen · Answer

Hi @Jasmine Benford - Baltimore is a great area for househacking. Good luck!!

Rent appt or buy house?

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