Should I jump in the pool or stay on the sidelines?

Question

31 Year Old Mortgage Professional in Phoenix/Scottsdale area in Arizona. Income is good right now (500k+) but in the mortgage business as you all know can be very volatile so I am paranoid about being house rich and not having enough cash. I am a cash guy at heart and I feel comfortable having ample reserves but I dont want to be too conservative.

I have 100k in cash savings to invest plus the amount I need to I feel comfortable that in the event I lose my job or the mortgage industry and housing market suffers a 2008 esque crash I am still OK.. Fears I have are probably fears other investors might share. Are we at possibly the top of the market? Something has to give at some point since housing and stocks are up for last 10 years. Is it in 12 months, 36 months, 5 years? We dont know. But I fear I will get burned as many did, but I also fear sitting on the sidelines and not taking the chance to earn long term wealth.

I am renting the home i live in. Still 12 months left on lease technically but landlord is flexible with me leaving early or even renewing lease again for another 12 months. Current rent is 2450.  This is includes down payment, repairs, furniture, etc..

Do I buy a primary residence to live in? Do I keep myself flexible and keep renting and purchase a home to rent out either as Airbnb? Do I buy a primary first, and as long as my income continues I keep saving another 100k to then buy a rental?

Price is flexible but I would like to stay around 500k or less. I would like to be in the Scottsdale or North Phoenix Area.

Thoughts everyone?

Jinal Parekh · Answer

Wow income of 500k???Care to share what you do exactly? i am looking for a career change at the moment and would love to hear from your!

Theresa Harris · Answer

@Rick Smitts  You're doing well with saving.  Run the numbers and see what makes the most sense.  If you buy a house and the expenses are less than $2450 a month, you will come out ahead as you are paying off your mortgage rather than your landlord's.  You could also look at a duplex or something with a rental suite allowing you to live in your own home while having extra income to help pay off the mortgage faster and decrease your living costs.  Air BNB require a lot of work and extra expenses.

Bevla Reeves · Answer

@Rick Smitts

WOOOOOOW!!!  You could own several doors by now making that kind of cash!!

And well on your way to retirement!!

But kudos to you for kicking ass at such a young age!!

And what makes you prefer paying your landlord's mortgage over your own???

I believe you perceive your fears to be legit, but (in my humble opinion) you could be living comfortably off of a 10th of your income while investing the rest for an early, secure retirement!

And then play for the rest of your life ...while you're still young!!

Cheers to your prosperity superfly! ;))

Melanie Johnston · Answer

@Rick Smitts your post reminds me of the [#AskBP 021] episode I caught on YouTube today:

https://www.youtube.com/watch?v=y5l6h2z6LMw

Never hurts to hear from Brandon Turner himself! It's an oldie but a goodie. You might consider a hybrid solution between buying for yourself and buying a property to Airbnb. Can you find a property that lets you stick your toe in the water of both home ownership and STR hosting? Might be good experience on both fronts. Start small, learn and grow.

Keep us posted on the direction you go. It will be great to get an update from Future Rick.

Ryan Swan · Answer

@Rick Smitts I personally like being house rich, because I don't spend a lot in other areas of life. Do you have a family or kids? If so, then I'd definitely buy and stop renting. My family and I moved up to the Kierland area of North Phoenix/Scottsdale and love it here (great schools).

You're young, which is great because it gives you flexibility. If you're comfortable renting, then focus on growing your rental portfolio first and then you can do the primary residence search later when you have a family.

Jody Bowen · Answer

@Rick Smitts First off, congrats on your success in the business. Have you thought about your overall goals and then worked backward to develop a game plan?  There are many different strategies that you can deploy to get started in your journey.