Buy own home first or rental property?

7 Replies

Hello, 

for reference, I am in Charlotte NC and I am looking to buy my first rental property in the area or my first home. I don't really have the credit and the down payment to do both. What do you think that I should do? 

Thanks, 

Henry 

Hi Henry.  I agree with Alberta.  You can get a multifamily & house hack, which will serve both purposes of allowing you to build equity & having a partial rental property. Financing is more favorable going this route, also.

@Henry D West it’s a great question. I do love the multifamily route, but Charlotte has a very limited amount of multifamily properties that would make financial sense for investing and cash flow. 

I have helped a client that is house hacking but with Airbnb, not a long term tenant. He is booked most of the month and it’s worked out that he hasn’t paid a single mortgage payment yet. If you’re open to that, it could be a great option. It will help you build something for yourself while not wasting money on rent. I’m sure you’re well aware of the crazy rental rates in Charlotte. 

The way I see it, if you stay renting and just buy a rental property, yes you’ll have the cash flow from the rental (ideally) but you’ll be throwing away thousands per year on rent. You’ll be able to save money faster for another down payment with house hacking. Happy to connect if you want to discuss more. 

@Henry D West I agree with most of the other responses.  If you don't have kids or dogs where you feel the need to have your own house definitely go the rental property route.  I've had my personal residence for 6 years and I regret buying it when I did.  I could have been light years ahead financially if I house hacked a 3-4 unit property.  Granted, I didn't know anything about Real Estate back then and currently need my house now with a wife, ~2 year old and 2 labs.

If you get into a 3-4 unit property with a low down FHA loan, you will be able to essentially live for free and a large portion of your income can be saved for a down payment on another property. This might not be possible in the heart of Charlotte but if you are willing to live in the outskirts or surrounding areas it should be possible. Also, I would recommend a property that needs work so you can renovate while you live there and then cash out refi down the road to use that equity in another property. If you are at a different place in your life a year down the road you can just move out and rent the unit for cash flow. At that point you've started with a good foundation and it will accelerate your investing business.

My advice to most is get in the game as soon as possible once you know what you are doing.  As I am sure you heard a lot on BP and other sites, the first will be the hardest and youll be hooked from there on.  

Hope this helps!  Let me know if there's anything else I can help with.