Trying to buy a primary residence and investment property

10 Replies

I am looking for some help to make a decision on my next purchase. I live in the Austin suburbs but in July, I will have to begin going to the office again. Rather than suffer through insufferable traffic/commute times, I'm considering buying a home closer to the city. 

With the appreciation in Austin, that seems like a positive decision. What could go wrong?

However, I also want to invest in cash flowing properties and don't want to dump all of my cash into one appreciating property. So the trick seems to be finding a property that I can afford AND leaves me enough cash to also invest into a second property.

My question is would you approach this differently? Am I thinking about this in the right way or is there something that I am missing?

Thanks!

Can you kill two birds with one stone by purchasing a multi-family where you can live in one unit and rent the others? If you'd like to buy two at once, I reach reach out to your preferred lender and run the financials by them to make sure you can definitely by two properties at once. Better to find out now than in July when you start shopping for a home!

@Dan Weber that's good advice to validate with the lender. Good idea! 

The one challenge I know I am expecting with a multi-family (besides the $$ required) is that my gf is totally against it. Trying to convince her but we'll see.

@Jim Piety general idea is great! Where do you live now? Finding cashflow close to downtown is hard. I've been successful in East Austin by doing larger rehabs on properties. Also what type of cashflow are you looking for? I'm ok with $100 per door roughly.

To clarify, you are looking to purchase a primary home, and have enough cash leftover to buy a separate investment property? Are you a first time home buyer?  How much are you looking to put down on your primary home? There are a ton of options and programs for home buyers these days, especially in Texas. It is just a matter of finding them, and figuring out what works best for you. A good lender should be able to fit you into a program that fits all your needs. Believe it or not, your situation is not unique. 

@Nick Marrone @Jordan Moorhead , I like the East Austin area quite a bit. Both MLK and east of 183 are key spots. I am a little concerned with crime/safety. I live out in Cedar Park and while I am technically not a first time home buyer, my girlfriend is and is looking to partner with me. So I anticipate being able to use an FHA loan or something similar.

With that said, my gf is not an investor or handy and so the idea of buying a fixer upper scares her. Heck, a large project scares me too. 

I do like the idea of finding a duplex but those are rare.

Definitely talk with a lender so you know exactly where you stand, how much you'll need to put down on an investment property, how much you'll need in reserves, your debt to income ratio, and how much you'll need to purchase a primary

@Jim Piety

Get specifics from a lender.

The order in the purchases could be vital.

Most lenders will want to see 2 years of landlord experience on your tax returns before they consider rental income on investment properties. Even then, there might be other requirements like having a lease and first month rent and security deposit.

If you have enough income to qualify on both purchases without rent income, then it shouldn't be an issue other than finding down payment and reserves (yes, you will probably need cash reserves to cover 3, 6 or even 12 months of PITI). One of the reasons the order can be vital.

You might be able to close on one and then open a HELOC to finance the next deal. That might complicate things financially so definitely speak with a lender about the details and requirements and have a plan.

I don't think HELOCs on investment properties are really a thing right now... so if that's the route, you'd want a primary first.

Otherwise, you get an investment property, and prove + cash flow for a year (again speak to a lender on these requirements) or two. Then a primary purchase. You could cash-out refi the investment to get the down payment for your primary. But that also delays a year or two.

Not to flood the board, but if you own a current primary and can get a lease on that property, that should help in qualifying for a new primary purchase. That would also be a benefit towards purchasing another investment later.

I agree with the above.  Speak with a lender so you can see if purchasing a $300-$500K home closer in allows you still purchase investment property further out.   Solid plan.  Time to execute sooner than later as prices only going up.

@Jim Piety I live on the east side and love it. I've had absolutely 0 issues with any sort of crime and have lived in several spots over here. I was off Springdale in my last place and am off Bolm now. You can use an FHA loan as long as you don't have one currently in most cases, check with your lender.