Investing in another city while still renting?

19 Replies

Hello Bigger Pockets community! I am a newbie investor (or at least trying to be). My boyfriend and I live in NY and well you can imagine how expensive it can be to purchase a home here so we are currently renting. We have enough money saved for a down payment and are able to utilize both a FHA loan (as this would be our first purchase) or a VA loan. We are looking for a multi family home where we are able to house hack and no longer have to pay rent. However with such an expensive market in our city we are finding it hard to find a home where the numbers make sense. My parents are working on their second home in Providence, RI and have suggested we purchase a home there. While I have found several homes in Providence that would cash flow nicely I am unsure if we should be making an investment while we are still paying rent. Has anyone done something similar or perhaps have any advice on what route we should take?

@Marielva Estevez hi! Welcome. I live in Queens also! Very good questions.

As the answers will varies, i invest out of state(South Florida) and renting in NY 🤷🏿 working well and cash flow...as all would agree be sure to have boots on the ground.

Best of luck!

@Marielva Estevez the key to investing out of state is to have a good team watching over and operating the property for you. If you're going to stay in NY and your parents are offering to help you with (or manage) an investment in Providence then that could be a no-brainer.

As far as investing while you're still paying rent, I think it's a non-issue. If you have excess income and you want to use it to try to build a nest egg for retirement, rather than spending it, then you probably want to invest in something. The question is whether that should be stocks or real estate (and if so, where), or some other asset class entirely.

Whether it makes sense for your current personal living situation to change from renting to owning is mostly a separate question, as there are pros and cons to each option. If it makes economic sense to change from renting to owning, i.e., you would free up more cash flow to invest, then that's something to think about doing.

But the question of how to best invest any excess income remaining beyond your living expenses, is (in my mind anyway) somewhat separate from your personal situation, and is a very personal question involving your risk tolerance, experience, interest, support from friends & family, etc.

@Marielva Estevez Hey fellow NYer and out-of state investor here. I currently rent an apartment in Williamsburg and I'm invested in the stock market, equity funds, bonds, flips, and our own multifamily investments. The way I look at it, is the difference in rent vs my mortgage potential would be the principal pay-down I would be getting on my loan and I personally think all my investments are going to provide a much higher ROI than paying down the loan. I plan to continue to rent for several years because of this reason. However, purchasing a home is obviously attractive for people who want to save money and build equity and may not have the financial sophistication to feel comfortable doing otherwise. I don't think one way is better than the other and is all based upon personal choices and preferences.

@Anthony Thompson My parents would be watching over the property plus my father is a contractor so I know it would be in great hands. I have never actually thought of it that way but you are absolutely correct it would be the same as investing in stocks while renting. Freeing up the money we spend on rent to further invest in additional properties was actually the reason why we considered buying a home in NY first. The market in NY is very expensive and short sales have become the only way we think we would be able to do so in this city but are unsure how feasible that would be for beginning investors like us. Thanks for the tip! You gave me something to think about.

I wouldn't get caught up in renting vs owning your personal home. Do whatever makes the most sense from a numbers standpoint. When we moved, I owned houses while renting until I found the right house for our family. NY is a hard market. If you can buy elsewhere that helps add cashflow to your pocket, do it. There's no one way to do anything. And the only "right" way is the way that profitably fits your situation. 

@Marielva Estevez I would suggest that you purchase your own property (if you can comfortably afford it!) instead of buying a rental property out of state. I purchased a condo in Los Angeles because the rent was rising very fast. This was the best decision I have made in my life. When you rent, you are basically giving your money to someone else. When you buy where you live, you are creating automatic wealth simply by living there. 

You get lots of taxable deductions, plus when you pay your mortgage you are essentially paying yourself back. At this point I have 175k + of equity that we acquired simply by just living somewhere. When you have time, please research all the tax benefits you will receive, and all the associated costs that come with homeownership.

I know this suggestion doesn't sound sexy or exciting, but it really is a super easy way to build automatic wealth.

@Marielva Estevez live where you want and invest where it makes sense. I live in California and would never ever buy here. But I do buy out of state in markets that actually cash flow. And don’t have crazy equity sitting doing nothing. Make your money work for you, don’t leave it idol.

@Marielva Estevez

Hi there, congrats on looking to start out. Don’t let you personally renting stop you from investing. Grant Cardone is a good example. The guy has thousands of units under his umbrella, yet he doesn’t own where he lives personally.

I'm also from Queens and while we rented for years, we now own a small co-op. However, with a growing family, I've considered going back to renting because we need a bigger space. I own rentals in Upstate NY and one in Kansas City. I agree with the saying "live where you want and invest where it makes sense." However, I still have a hard time letting go of an asset in NYC while solely investing elsewhere. Even with a co-op, there has been significant appreciation. It's the sort of appreciation which would take many many years for a cash flowing rental in the Midwest to make up. I also see Ramon's point above with regard to tax deductions though with the recent tax changes, that may be less of a benefit.

I would love to house hack but as you've found...the numbers still doesn't make sense.  I wouldn't even expect the other unit to cover the entire mortgage.  I've considered buying a multi-family...rent a unit and/or Airbnbing another unit to make the numbers work better...

I think you have an opportunity to buy a small multifam (3-4 units) and house hack that you can keep one unit for yourself as a primary residence and have the mortgage paid by the renters of the other units. Now, there are a lot of variables in that but if you bought that in Providence, and did it right, you could rent a place in NY as a second residence. Financially you might end up in a wash at the moment but you would be building equity and an investment property in an area that's more affordable while maintaining a place to stay when you visit your parents.

Sooooo many variables involved in doing that but I just wanted to put it out there that if it works for you, it's an option to take a peak at.

Very interested in this thread.  I am in the same situation.  Always thought I was saving down for a good downpayment on a house until i got bit by the real estate bug over a year ago.  Been researching since.  I now plan to continue to rent and build a portfolio.  I work remote so I can move anywhere.  Thinking about house hacking for a year and building a portfolio in a good market for cashflow.  The hard part is choosing the right market and moving there.  I want Florida but really difficult to find properties that make sense.  I just wish the market would tank already.