Live for free or start investing?
I am currently living in my parents’ old house and not paying rent. I have a good job and am banking every single cent I make. I am also ready to start investing. I have enough down-payment money saved up and have analyzed a few deals that I feel fairly confident about. My strategy would be to put 10-15% down on a primary residence, live in it for a year, fix it up a bit, then start renting it out after one year. I would take out an investment loan but I don’t have 20-25%, as I live in an expensive area (DC).
What should I do? Again, I am ready to start investing, but I have a great thing going on for the time being, living for free. What would you do if you were in my shoes? Continue living for free and saving tons of money, or jump into REI?
You can buy a rental, rent it out completely, and still live with your parents. No law that says you can't live at home and still have rentals. I have a tenant that was never there, always at his parent's house, tells me he likes his mom's home cooking, and sleeps there as he's too lazy to shuffle back to his apartment.
@John Paul Whaley You could also house hack. Buy a multi family with an FHA loan and live in one of the units.
@John Paul Whaley I would do house hacking. That way you still live free and invest as well.
#3 Managing Your Property Contributor
I believe you can get a regular mortgage with a lower down payment if you plan to live in it for at least one year. and then rent it out. Repeat the process as often as your finances allow.
My brother liked living at home, and my parents enjoyed having him around. This was over 25 years ago, they made a deal where he could stay to save up paying for his home ALL CASH living for free. He finally bought a townhouse for $180K paying all cash after saving up over $30K a year. Initially his only expense was car payments, and he had a job travelling and had meals and entertainment on the expense account. Then for the 2nd car, it was all cash.
He was thinking of buying a rental at the time, but when you're 27 years old, you can pay all cash for a car and a property, its awesome. With all cash, he didn't have to consider low down payment OO loans, or more expensive NOO mortgages. At the time, had he bought 2 of them all cash, he could've retired at age 33.
I was 10 years older, at the time, I was married, and all my married friends were struggling with mortgages, car payments, credit cards, and my brother goes around paying cash for everything, i.e. house, car. When I mention it to my friends, they found it hard to believe. I told them, it's not so hard, all you have to do is stay home with mom for a few more years.
I'm not sure I'm understanding why you would take out an investment loan on a primary residence? My understanding of the rules (lenders please correct me if I'm wrong) is that you can have a conventional loan, retain the conventional loan and repeat the process with the next primary residence.