Primary Residence Vs Out of State Multi

9 Replies

Hi BP, 

Im newer to BP and look forward to becoming an active member of the community. I currently am in the situation where I am looking at either buying my first primary residence home, living in it and renting out the extra rooms house-hacking and living for free, or buying a multi family out of state. I currently live in Salt Lake City Utah so a multi family in Salt Lake within the radius of where I need to live for work is a little out of the question. My question is I have about 20k of capital which would allow me to get either a ~300k home in SLC and use my capital for the 3.5% down payment and closing costs or use the capital for a 20% down payment on a ~100k out of state multifamily that will cash flow. I currently have a good living situation and only pay 500$ in rent so my rent is not high. In Salt Lake I have found houses in my area and price range with 4-5 bedrooms so I'm confident between friends and rental websites I would be able to cover the mortgage and house-hack that way. 

My first big question is which option do you see helping me achieve financial independence quicker? If I get a primary residence mortgage it would have me close to maximizing my DTI I don't think I would be able to qualify for another mortgage for at least a couple years.

Are multifamily homes mortgages calculated the same way? Or if it is an investment and income generating asset could I qualify for another mortgage for the out of state home a couple months after purchasing the primary residence?

Is it worth continuing to pay rent at ~$500 a month for an out of state multi? My goal would be to find a multi that would at at least cash flow $500 so that I would still be living for free and could save that money for another property. 

I would love to have my own home and build equity in it with other people paying my mortgage but am unsure if this is the best and quickest path to building a solid real estate portfolio in the coming years.

Any help answering these questions would be much appreciated as I am not sure which direction to move in. 


My gut reaction is to buy the property and live in it since this is your first deal. With an out of state property there are numerous headaches and you can't just fix things yourself if you have to. I would try to buy a duplex and live in one half or get a SFH and rent bedrooms.

I suggest finding numerous SFH and investment properties (out of state) and calculating your ROI, find out if its really worth your wild to sink 20k in a property that might cashflow 200/month, find which area might appreciate faster..and execute!

Always secure a primary residence first. Any returns you might see from a multi will be completely lost by renting. The best move is to house-hack.

I also vote for house hack for reasons already mentioned.

I would also add that it's much harder to refi or take a line of credit out on an investment property than your primary residence.

Hey Kramer, I am also in Salt Lake, so I know the market you are looking in.

I would highly recommend getting a single family home with a mother in law apartment that you can rent out. If you find the right home, this will easily cover at least half of your mortgage, if not more. If you are in a position to also rent out any other potential bedrooms in your personal unit, this could allow you to have little no housing expense.

I have done this 3 times personally. I'd be happy to chat further if you have questions.

@Kramer Holt -
Howdy Kramer! I'll throw my opinion in the mix. 
I would suggest for your first property purchasing something local. That way you can self manage and get some experience dealing with tenants, repairs and the like. I've built my portfolio in SLC proper and cant get my head around going out of state. If you purchase a multi-family I believe you can use 70% of the other units income to qualify. I think 2-4 units are perfect for your first deal. 

@Kramer Holt

First, I have a keyword alert for Kramer and I think it is awesome that your first name is Kramer.

Coincidence is that my best friend moved out to SLC and is looking for his first home. He is an accountant and his wife is a pharmacist, so they make decent money but it's impossible to find anything decent in compatison to Toledo real estate prices.

I always advise everyone I encounter to house hack when possible. There is not a better deal out there if you can get away with 3.5-5% down on a multifamily. For the rest of your life, if obtaining through traditional mortgage financing, you will need 20-30% down on investment properties. Now, you're in SLC and I agree that it will be tough to get a reasonably priced multifamily. Also, you're paying $500/mo, who knows how because my bet is most 1-bedroom places there go for well over $1,000. I want to tell you to keep saving with that low rental rate and give yourself more options, but that SLC market is soaring, it's hard to advise not to jump in while it's still climbing, even though it's seemingly expensive.

Best of luck to you, Kramer.


@Kramer Holt what about house hacking with a multi-family residence? You can live in one unit and rent out the other units. If you choose to you could rent out the other rooms, in your unit. You can go up to a 4 unit property with FHA.