Debt free or buy SFR?

Question

Hi BP, I've got a personal question. My folks are giving us(my family) their big house in exchange for us building them a small living quarters. It'll cost $100k+/- to build. We have that saved in cash. Do we pay for it and be "debt free" or take out loan and buy rental properties to cover our payment with that money? I'm a rookie investor with 1 local SFR now. As you know, interest rates are crazy. I've looked at some turnkey rental companies to buy from. I'm just trying to figure out what's best wealth building for my family. Thanks in advance!

Jessica Harrison · Answer

From a wealth building standpoint, i would recommend buying a small multi-family property in a good area that will cashflow. You won't necessarily need the full $100K for the down payment. So, you can then use the rest as a down payment on a loan to build the extra living quarters.

Just another thought... how much equity is in the house that they are gifting? Could you do a cash out refi or home equity loan and use some of that to cover the building project?

Preston Dean · Answer

Thats such a unique situation! Im a realtor here in FW and I would say cash is KING. You never know when you are going to be in a "pickle" and need some cash on hand. Maybe think of putting 1/2 down so you have a minimal loan but you also have cash on hand for emergencies and then as you can make larger payments. If you need me to connect you to a loan officer I can