I am recently out of college, and finally have a decent paying job. I want to eventually work my way into landlording, but at the current time I simply don't have the cash to put a large enough downpayment onto a decent duplex/triplex to make it profitable. Further I don't realistically have the cash flow to guarantee I can afford a duplex/triplex in my area if a renter leaves (I plan on living on one side).
However, I do have the means to buy a personal starter home in the $100,000-$150,000 range, and think it'd be a great way to build equity, which I could then put towards a multi-family home.
So, my question is this: Are there any types of home financing options out there that don't front load interest payments?
My reason for asking is that I know with most home financing loans you're really just paying off more of the interest in the first ~5 years; obviously limiting the equity I can build. I'm new to my current job. I'll probably have new/better job opportunities in the future, very possibly in a different city. Even if I don't, I want to get into landlordship sooner than 5 years from now, and would like to build as much equity as I can in the present.
Bottom line: is buying really better than me renting, given that I may not be in the area for 5 years? My hunch is yes, but who knows; the market could crash and I'd be SOL.
Any advice is greatly appreciated.
Thank you for your time,
In terms of existing loans, I have never heard of one. What you can do is buy a cheaper home and put more money towards principle. But realistically you really have to take a look at how muhc "return" you would get by putting extra towards a mortgage instead of just saving in a CD of some sort.
There are websites you can use to calculate an amortization schedule for a loan which you will see how much you would owe after 5 years of owning. Then compare the equity you built in those 5 years vs simply renting a cheap place and saving the difference every month. If you can rent for a decent amount less than a mortgage. That might make more sense than paying the bank all of that interest.
Another thing to consider is buying a cheaper home that needs some TLC that you could do in the 5 years you live there. If you put 5 years of sweat equity in a property you could be building even more equity by increasing the sales price 5 years down the road. Just make sure you don't over estimate what you can actually do yourself and buy a money pit.
@Brent Larson I may have some options for you to pick up rental property without putting a large chunk down and building equity into it. Please shoot me an email directly, and we can discuss this further to see if we can help you out.
ALL loans will work that way, since your interest payment in any given month is directly related to the outstanding principle balance, at that moment.