Buy and Hold OR House Hack?

1 Reply

Help!

Basic info: I’m married with a 5 year old. I hate my job. I have a 2.5 hour workday commute. I live in a great neighborhood with excellent schools. I just fixed my credit and have developed a much better relationship with managing money. I want to be financially free. That means, I don’t have to work 40 hrs per week and drive 10 hrs per week to make enough money eat and pay bills.

Question: Which would you do?

Option A: Buy a multi family in Chicago in an up-and-coming neighborhood?

The problem: I do not have 25% for a 203k loan that I would need to purchase and rehab the property. I do not want to move into the building because I have a family with a young child and the schools are below my standards.

Option B: Buy a townhouse that needs some TLC in my area, live there, update it, then either sell it or make it a rental.

The problem: The only problem is that I would have to wait until my lease is up so I don't get sued, which isn't actually a problem at all.

Option C: Get investors for A, and do B.

The problem: The only investors that I can get are family and friends.

@Latifa Al Latif

Yeeeaaaa.... All your options suck at this point.

However, let us see if you have other options. The job you have now, do you think you are able to find a similar job or career that is closer to home? I have a suspicion that you may say Yes but it will pay less. My counter to that would be "How much less?" If it is a 5K-10K drop in salary, I wouldn't mind taking the lower paying job. You will be able to maintain your sanity and your bodily health. You will also save a lot of money on car maintenance. If it will be a 15K-20K salary difference then I will stay where I am at.

If change in job location is not an option and you can only pick between your said options. This is what I will do.

If the townhouse in option B is in a good or in demand neighborhood where the After-Repair-Value of the property will be a significant amount and you either have experience in flipping or have a contact with a good contractor, I will pick option B. However, here is my twist. I would still stay in my current rental. Borrow money from my family and invest enough money to make it sellable. No high end stuff that will run up the bill but upgrades which will make the property worth going to an open house for.

I will then resell the townhouse. Whatever the profit made, you payback your family with interest and keep your part of the profit. Realize how I only said borrow from family. I personally would not borrow from friends. Family have a better ability to forgive than friends.

With this option, you still stay in your neighborhood and kids get to stay in their school, you won't get sued for breaking your lease while at the same time dabbling in Real Estate Investing. Win Win.