Should I rent while I start this investment journey?

Question

My husband and I sold our condo (not knowing anything about real estate investing) earlier this year to buy our dream home with the profit we made. Currently we are living with in laws while searching for a house but have realized the market in CO to build or buy is insane. We stumbled across real estate investing and have since dived deep into webinars and books trying to soak up all the information we can about it. My question is do we rent our own home while we begin our investment journey or is there a better solution? I don't want to put money into someone elses rental when I could be investing in ourselves while we start this. Any insight would be much appreciated!

*I have looked into house hacking and we have 2 kids and 3 pets, I don't think that will work*

Matthew Brill · Answer

@Celine Corley

Nope. I have done 2 house hacks and both have had individually fenced yards between the units. And if you find one with a yard, you can always put up a fence or retaining wall.

Matthew Brill · Answer

It depends on the price point/monthly payment. Higher priced home it makes more sense to rent (with rent to value ratios less than 0.7). The less expensive the house/payment is, the more it will make sense to buy instead of rent (basically, it can function as a rental when you move out).

Also, don't rule out house hacking just because you have kids and pets. I house hack in a nice area, with a good school district, and a yard. The units have the front doors on the side and I hardly ever see or hear the tenants in the adjoining unit.

Nicholas L. · Answer

@Celine Corley you will have to decide what property is right for your family.  I'll say this - from a purely financial perspective, there is nothing wrong with renting in the short term.  No closing costs - no financing costs or points - no commissions - and the flexibility of simply leaving at the end of the lease.

Also... what's your financial situation like?  Are you still looking to buy your 'dream home' and buy a rental?  Do you plan to stay in Colorado?

Trevor Davis · Answer

Doing this a time or two before buying your dream home could be great for you.  The "Denver Real Estate Investing" podcast advocates a strategy pretty similar to your idea.  They are starting to include the Springs market too.  It's a pretty dialed in podcast that is binge-worthy, and worth keeping up with.

Tyler Williams · Answer

@Celine Corley

Run the math and go by that. Obviously with the family you want to make sure you are in a nice area for schools etc. for your kids but renting isn’t a bad idea as long as it’s helping you reach your goal.￼

Jeremy Gaal · Answer

@Celine Corley house hacking may be a great way to use your capital. We have a meetup group (this comin thursday at Oskar Blues) that talks about rental properties and house hacking in the Springs. Let me know if you'd like to know more!

Theresa Harris · Answer

Some times it takes a while to get to your dream home.  Why not look for something that needs a bit of work and you can live in for a few years while you look for your 'dream home'?  You can then rent that house out once you find your dream home?  If the market keeps going up while you are saving money living with your in laws, you aren't keeping up with the market and may be priced out.

Tyler Williams · Answer

@Eric James

I agree. Low to middle priced homes are usually a better position, at least for buy and hold.

Eric James · Answer

Upscale houses generally don't provide high enough rents to be very profitable. You might not want to live in a high ROI rental. Also, keep in mind, if you get a primary residence mortgage you need to live in it for a year.

Celine Corley · Answer

I was thinking even buying something that needed work or is a smaller house. Live in it personally to fix it up and then rent it out.

Should I rent while I start this investment journey?

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