Rent or buy for primary residence?

Question

My family and I are currently renting as we moved a few years ago. My question is should we buy a primary residence before buying any investment properties. Will renting for our primary residence hinder us in our investing future? I am not against house hacking however my wife isn't on board because we have 2 small children. Our area does offer SFH with property some of which have a rental on it. Would this be the best plan to launch our investing future.

We have a goal and plan to start with small multi-family. The aim goal is obviously Financial independence, with cash flowing rentals. We live between Houston and Galveston.

I am new and this question may be easily answered by many. Thank you for your help and opinions.

We have a goal and plan to start with small multi-family. The aim goal is obviously Financial independence, with cash flowing rentals. We live between Houston and Galveston.

I am new and this question may be easily answered by many. Thank you for your help and opinions.

Laura Marks · Answer

I agree with the few above that said duplexes. I'm trying to get my kids to buy duplexes for themselves.

Joe Splitrock · Answer

@Joshua Osseweyer one option for house hacking is buying a duplex (twin home). You will have complete separation from your tenants other than sharing a wall. Newer twin homes have double sheetrock and thick insulation between the properties, so noise issues are avoided. This may be the best of both worlds. You get an investment property and your wife gets privacy. This option allows for low down payment, which makes it easier to get a good cash return.

As far as whether to rent or buy your personal residence, that depends on your long term living situation. If you only plan to live in an area for 2-3 years, it may be better to rent.

JD Martin · Answer

Do both. Buy a duplex or a triplex. Then you won't have strangers in your house and you'll have 1-2 units to start with. It doesn't have to be an either-or proposition.

Given the binary choice between buying a primary home first or an investment property first, I would choose the investment property. Making money is about getting investments as quickly as possible for as long as possible. If I could go back and do my life over again, I would have either started with duplex/triplex properties, OR bought a dump, lived in it while I fixed it, moved into my van and rented it out, and repeat, until I had enough cash flow to let that cash flow buy me a place to live. The last 15 years I really had to kick ass because of not paying enough attention to getting investments working for me when I was younger.

Joshua Osseweyer · Answer

@Cameron Tope  thank you for your advice.  Our jobs are as solid as they can be in this day and age. I am focusing on as you said lowering my expenses while building a solid portfolio of cash flowing rentals. I love hearing people who are doing it Congratulations.

Wale Lawal · Answer

If you were my client, I would advise you to house-hack to build your portfolio in real estate. House hacking comes with many advantages like:

• 1.Reduce or eliminate housing costs
• 2.Gain flexibility
• 3.Mitigate risk
• 4.Tax benefits

You could also apply for an FHA loan, meaning you'll need a down payment of only 3.5%. I would also advise you to look for a newer build to minimize maintenance costs and avoid hidden surprises and the initial rehab work. You will also obtain the benefits of new appliances, among other things that come with a new home. Good luck!

Abel Curiel · Answer

Great question @Joshua Osseweyer!

Its great that you and your wife are on the same page as far as investing in RE as a vehicle to become financially independent. I can totally understand her hesitation when considering the house-hacking strategy since a mother's primal instinct is to make sure her children are safe. That said, I do believe it is the best strategy for beginning to build your portfolio especially if you are looking to keep acquisition costs as low as possible... AND especially if you are comparing house-hacking to purchasing a primary residence.

My wife and I have had very similar conversations in which I was bullish on house-hacking and she preferred not to 'risk' our family's safety. These are not always easy conversations to have but I would lead with data... Show her what your expenses will be as a SFR owner vs. your expenses on a house-hack deal. Many of the house-hack deals that we review with our clients show that they'd save anywhere from 25-50% on their monthly expenses when compared to a SFR that produces no income.

Lastly, I would highlight that this can be a temporary living situation. Although you do have to occupy the property for at least 1 year (if you're putting down less than 20%), that 1 year of project management and property management experience can be worth tens/hundreds of thousands of dollars! This is experience you can leverage as you move onto other investment properties. After all, you're not going to become financially free from 1 deal, right?

Best of luck to you and your wife on your REI journey!

Abel

Cameron Tope · Answer

Hey Josh,

It really depends on a lot of factors - your job stability, the price of home you would purchase, etc.

I own over 30 units and currently rent because my rent is $500/mo.

If you can save money renting then it's a great option to work up into a live-in-rent (like live-in-flip but you keep it as a rental). Repeat the process for a few years and you'll have a solid portfolio of cash flowing rentals.

Hope that helps!

Joshua Osseweyer · Answer

@Jon Kelly thank you everyone for the advice.

Jon Kelly · Answer

@Joshua Osseweyer rent vs. buy is always a personal choice. Renting will absolutely NOT hinder you from future investing. In fact, some will argue renting will help you invest. Instead of making a down payment on your primary residence you can use the $$$ for the down-payment on your small multi-family property.

I have 50+ units and continue to rent. Best of luck on your search for your first multi-family!

Joshua Osseweyer · Answer

@Abel Curiel thank you for your insight. Yes FI isn't coming from one deal nothing should be that easy.  I am in the process of building our team in the area we want to invest in. Which is houston galveston area as of yet.

Rent or buy for primary residence?

Most Popular Reply