Decision making process different for primary vs investment?

Question

Hi BP,

I found a REO property that I can get a little under market value, but not the great price I was hoping for. I want to make this my primary home that I grow old in. My question is, should I treat this decision differently than I would an investment property? I won't have much equity intially. It would be unlikely to rent for a profit, but there is plenty of opportunity to update the house and add value that way. Again, I plan to live here forever so my initial thoughts are that it's not that big a deal to have little equity or ability to rent later. I'd love some feedback (to include don't let emotions drive your decision)!

Ron Todd · Answer

@Eric Carr Thanks, that makes sense. The comps I got from the realtor for the neighborhood are all over the place. They range from mid 100k to over 400k. It's hard to narrow down more accurate comps because the homes are all very unique in this neighborhood.

Ron Todd · Answer

Thanks for the replies. I've always bought my primary homes with the intent to move after a few years and rent it out. This is the first time I've found what I want to be my forever home, so it changes the game!

Frank Wong · Answer

Hi Ron,

To me, it sounds like you got a great start for an owner-occupied house.  Most important is the house located in the neighboorhood that you want to live and own in?  If Yes, perfect.  You get to buy it a little under market fix up and add value over time as you said.  Sweet deal. Enjoy it that is what owning and buying for yourself should be.

Theresa Harris · Answer

Your home is different than an investment property as you want it to appeal to you, not to a renter.  Buying your home is also similar to a rental in that you want to get a good deal, good location, etc.

Palak Shah · Answer

@Ron Todd your home isn’t just about money. It’s about where you want to spend a lot of your time. I’d definitely treat it differently than a cash flowing asset.

Eric Carr · Answer

@Ron Todd

Typical of the banks. They don't want to budge at first. Get into it, and use everything you can as negotiating ammo. It could come to the point where they are so close to a sale, that they will deal to get it off the books. Get into it and work them, they aren't giving anything up just because someone is interested. Best of luck, let us know how it goes

Ron Todd · Answer

@Eric Carr

All of the above, every house is a different style and the age range of the homes is pretty wide. There are 1980s 3bd 2baths and then there are 1920s 5 bd 5 baths with everything in between. Its a great neighborhood and the general vibe is the area is improving. I figured as an REO the bank has had for years there would be more flexibility in price, but they are sticking to their guns. I want one of the older, bigger homes and it looks like its in pretty good shape. I think it will all come down to the inspection results and whether the bank will play ball after that.

Eric Carr · Answer

@Ron Todd

That's interesting. Unique in the sense of size, number of beds? Other features? What's the general feeling of the neighborhood, improving? Have such disparate values says to me, there is opportunity and the area is improving. Are the lower end of those ranges homes that are outdated, functionally obsolete? Seems a neighborhood with such a range deserves a good look as to why.

Eric Carr · Answer

This is a home and I think that it's important to look at it through the business lens but not as you would an investment property. I look at it like this; you have to pay to live somewhere, you found a house you like, under market, with opportunity to rehab the way you want it and force appreciation. You could like in it for 2 years at least and trade up tax free. You aren't renting it, so leave that out of the thought process. You're going to live there! So while I wouldn't lose money or over spend, I wouldn't look at it through the same process as a rental. So analyze it like an investor for proper value - comps, etc, don't overpay the bank, but remember you're going to live there, it's not a rental.  Sounds like it could be a grat opportunity