How do you approach a house you’re going to live in

4 Replies

How do you approach a house you’re going to live in.We are getting ready to bid on a property that instead of renting we are thinking about living in for a few year (5-7).It will be a rental till my husband retires form the military (2 yr) and then may become a rental if we move on.The house is in a good location.The neighborhood is older, but the homes are being revived. It’s close to good schools and down town, has a big lot, but is a foreclosure and needs 20-25K worth of work that we can see.After repair value is 130K I’m hoping to get it for 60-85K.Would you pay more for a home you’re going to live in?I do want it to be a sound investment.

@Andrea S.

Your best bet is to go with VA loan if you can take care of the payment since you want to live it the property and your husbend is in a militery.othervise you can buy it with FHA or conventinal loan.Hope this help.

This is an all cash auction. We will refinance after it's rented. We can't use a VA loan because we currently have one. Unless we wait to refinance till he retires. We had planned to purchase 4 more rentals over the next 5 years, and living in one of them. Then snowballing all the cash flow to pay them off early. We would rather have more income and fewer units, so I would like to pay them off faster. But should I spend more for the one we are going to live in? I'm thinking NO but I don't want to lose the house because I can really see us being happy there.

All of our other rentals have always been rentals. In my mind it does not make sense to spend more just because we are going to live in it....but it does because we are going to live in it. This is a personal choice, I know. I'm just curious if others look at their primary residents as an investment and treat it that way.

Would you push the budget because you’re going to live in it? I do not want to pay more than market value when all is said and done, obviously. If it was a straight rental I’d like to come out with some equity.

By the way I’m reading this and thanking I sound like an idiot if you could just ignore that I would appreciate it. Thanks

There are a few things to address here.  If you buy that property and have all in of $110, what will you get for rent?  If your expenses are less than rent, then it makes sense to me.  I might even consider breaking even if I really wanted to move into it in a couple years.  IMO if you will be negative on the cash flow, I wouldn't do it .

Your thoughts of paying down the mortgage is a common misconception about cash flow. You can make more money with the same money leveraged than you can having that money tied up in equity. Look up the BRRR strategy discussed in other threads and also a webinar.

Basically, look at it this way.  If you can get that property all in for 104k, and refi at 80%. (130k x .80 = 104k)  If you can still make it cash flow, then you get all your money back to do it again.  This leaves you with an unlimited amount of houses you can buy, and an unlimited amount of cash flow each month.

Originally posted by @Reed Starkey :

Your thoughts of paying down the mortgage is a common misconception about cash flow. You can make more money with the same money leveraged than you can having that money tied up in equity. Look up the BRRR strategy discussed in other threads and also a webinar.

Basically, look at it this way.  If you can get that property all in for 104k, and refi at 80%. (130k x .80 = 104k)  If you can still make it cash flow, then you get all your money back to do it again.  This leaves you with an unlimited amount of houses you can buy, and an unlimited amount of cash flow each month.

Refinanced at 70% the property should cash flow at about 250 each month after PMI, maintenance, management and long term repair cost. According to the BP calculator. However I would rather have 10 units paid in full bringing in 2-3 time that than 30+ at 2-250.

The rent on this property should be about 1000 a month for the 2 years it will be rented.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here