Working towards our “why”

Real Estate Investor · Unadilla NY · Member since 2017 · 418 posts · 297 votes

2y

What if you sold your house , bought the hobby farm ( making it your new primary), and used the proceeds for an investment property?

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Joshua JanusBusiness Member

Realtor · Cleveland, OH · Member since 2021 · 1k+ posts · 1k+ votes

2y

Quote from @NA H.:

Hi! My spouse and I are trying to figure out our next steps and would appreciate any advice. We are new to real estate investing and trying to figure out if it would be better to buy a home in our area or focus on building up an out of state portfolio. Our end goal and “why” is to be able to move our family to some acreage and raise our kids on a little hobby farm. One acre with a fixer upper is currently around $400k-$500k+ and the monthly payment for that amount just stretches us too thin right now.

-we currently own a home and have a $75k Heloc available to tap into. The mortgage is $1100/mo and will rent for around $1900/mo whenever we decide to move.

Option 1: buy another “starter” home for around $375k and plan to live in it for around 5 years while renting out the current house. Hopefully by the end of that time frame, it will have appreciated enough that we can sell it and use the equity as a down payment on some acreage while still keeping the first house as a rental.

Option 2: stay where we are and use the heloc to invest in rental properties out of state like Kansas City, Cleveland, etc. Over the next few years continue to buy a few more properties to build up the monthly cash flow then use the increased income to buy our acreage property.

Our area is projected to continue to grow and appreciate fairly quickly so we are afraid of getting priced out of buying our little farm if we wait too long. What would you do in our situation? Any other ideas or food for thought? Thank you for your advice and taking the time to read this!

I would use the proceeds to buy some cash flowing 1-4 units. Cleveland, Cincinnati, Fayetteville etc all have some good options to get into with a lower price point

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Dan M.:

What if you sold your house , bought the hobby farm ( making it your new primary), and used the proceeds for an investment property?

We’re very hesitant to sell our house due to a 3% interest rate and the fact that we bought it for $200k and it would sell for $375k. Our hope is that we could hold it long term in order to have a rental house in our area. And we most likely wouldn’t have enough proceeds for an investment property somewhere in addition to a down payment on a hobby farm.

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Bruce WoodruffPro Member

Contractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes

2y

I wouldn't wait 5 years to go after your dream....time flies by way too fast. Whatever you do, do it now. Does your 'hobby farm' have to be in Idaho, or are you open to other states?

Of your two options, I like some version of #1......

1 Reply

NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Joshua Janus:

Quote from @NA H.:

Hi! My spouse and I are trying to figure out our next steps and would appreciate any advice. We are new to real estate investing and trying to figure out if it would be better to buy a home in our area or focus on building up an out of state portfolio. Our end goal and “why” is to be able to move our family to some acreage and raise our kids on a little hobby farm. One acre with a fixer upper is currently around $400k-$500k+ and the monthly payment for that amount just stretches us too thin right now.

-we currently own a home and have a $75k Heloc available to tap into. The mortgage is $1100/mo and will rent for around $1900/mo whenever we decide to move.

Option 1: buy another “starter” home for around $375k and plan to live in it for around 5 years while renting out the current house. Hopefully by the end of that time frame, it will have appreciated enough that we can sell it and use the equity as a down payment on some acreage while still keeping the first house as a rental.

Option 2: stay where we are and use the heloc to invest in rental properties out of state like Kansas City, Cleveland, etc. Over the next few years continue to buy a few more properties to build up the monthly cash flow then use the increased income to buy our acreage property.

Our area is projected to continue to grow and appreciate fairly quickly so we are afraid of getting priced out of buying our little farm if we wait too long. What would you do in our situation? Any other ideas or food for thought? Thank you for your advice and taking the time to read this!

I would use the proceeds to buy some cash flowing 1-4 units. Cleveland, Cincinnati, Fayetteville etc all have some good options to get into with a lower price point

Thank you for your advice! I will look into those cities more.

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Bruce Woodruff:

I wouldn't wait 5 years to go after your dream....time flies by way too fast. Whatever you do, do it now. Does your 'hobby farm' have to be in Idaho, or are you open to other states?

Of your two options, I like some version of #1......

We would like to stay close to family in Idaho. Thank you for your input!

0 Reply

Samuel DioufBusiness Member

Real Estate Agent · Columbus & Cleveland, OH · Member since 2023 · 1k+ posts · 1k+ votes

2y

Cincinnati is a good option to look into. The city has an annual output of $132 billion and a heavy concentration of Fortune 500 companies, making it a top economic metro. Homes are still meeting 1% rule there as well.

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Ryan Wallace

Real Estate Agent · Eagle, ID · Member since 2019 · 45 posts · 28 votes

2y

I wouldn’t wait 5 years to make your hobby farm dreams happen. You can make more money, but you can’t make more time.

Consider finding an area where you hope to start your hobby farm. Then jump on landglide or onx and find out who owns the property. idaho, especially ada and canyon county has some funny development laws but a lot split would be possible. Reach out to the owners directly and convey that you want to start a hobby farm and are looking for roughly x acres, would they consider selling that portion of property. Most of the older folks in the area who hold the land are approached constantly by developers so a small family looking to do what they did 30 years ago might tug at their heart strings. You’ll cover the split fees and do the leg work for them. It’s labor intensive but really how the best properties are found.

Meanwhile keep looking for deals in your other target markets. It doesn’t need to be an exclusive one or the other. There is always a way to find the money when an amazing deal comes up, so don’t make the mistake and just pigeon whole into one path.

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Ryan Wallace:

I wouldn’t wait 5 years to make your hobby farm dreams happen. You can make more money, but you can’t make more time.

Consider finding an area where you hope to start your hobby farm. Then jump on landglide or onx and find out who owns the property. idaho, especially ada and canyon county has some funny development laws but a lot split would be possible. Reach out to the owners directly and convey that you want to start a hobby farm and are looking for roughly x acres, would they consider selling that portion of property. Most of the older folks in the area who hold the land are approached constantly by developers so a small family looking to do what they did 30 years ago might tug at their heart strings. You’ll cover the split fees and do the leg work for them. It’s labor intensive but really how the best properties are found.

Meanwhile keep looking for deals in your other target markets. It doesn’t need to be an exclusive one or the other. There is always a way to find the money when an amazing deal comes up, so don’t make the mistake and just pigeon whole into one path.

Thank you that is a great idea! I will look into that. I appreciate your input!

0 Reply

Dan M.

Real Estate Investor · Unadilla NY · Member since 2017 · 418 posts · 297 votes

2y

Quote from @NA H.:

Quote from @Dan M.:

What if you sold your house , bought the hobby farm ( making it your new primary), and used the proceeds for an investment property?

We’re very hesitant to sell our house due to a 3% interest rate and the fact that we bought it for $200k and it would sell for $375k. Our hope is that we could hold it long term in order to have a rental house in our area. And we most likely wouldn’t have enough proceeds for an investment property somewhere in addition to a down payment on a hobby farm.

I don't know the cost of things in your area but you would get the proceeds of the sale tax free from federal income tax from the primary residence exclusion. I'm guessing you owe around 150-100k so you would have 225k to play around with. I know that 3% rate is great but look at the bigger picture. If you rented it out, youd make 800 a month, or 9600 a year ( lets assume paydown of loan pays taxes and capex/repairs insurance etc, maybe its more or less you know the numbers not me ) So if you have 225k of equity and make 9600 a year your return on equity is only 4.2% , maybe less. Could you make more than that buying an investment property with 25% down ( roughly 100k down if im not mistaken ) , put a downpayment on your hobby farm, and throw the rest into 3 month treasury bills /whatever ? Just an idea.

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Dan M.:

Quote from @NA H.:

Quote from @Dan M.:

What if you sold your house , bought the hobby farm ( making it your new primary), and used the proceeds for an investment property?

We’re very hesitant to sell our house due to a 3% interest rate and the fact that we bought it for $200k and it would sell for $375k. Our hope is that we could hold it long term in order to have a rental house in our area. And we most likely wouldn’t have enough proceeds for an investment property somewhere in addition to a down payment on a hobby farm.

I don't know the cost of things in your area but you would get the proceeds of the sale tax free from federal income tax from the primary residence exclusion. I'm guessing you owe around 150-100k so you would have 225k to play around with. I know that 3% rate is great but look at the bigger picture. If you rented it out, youd make 800 a month, or 9600 a year ( lets assume paydown of loan pays taxes and capex/repairs insurance etc, maybe its more or less you know the numbers not me ) So if you have 225k of equity and make 9600 a year your return on equity is only 4.2% , maybe less. Could you make more than that buying an investment property with 25% down ( roughly 100k down if im not mistaken ) , put a downpayment on your hobby farm, and throw the rest into 3 month treasury bills /whatever ? Just an idea.

That is definitely something to think about. It’s hard not to have tunnel vision with a 3% interest rate, so I really appreciate your perspective. I will consider that as an option. Thank you!

0 Reply

NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Samuel Diouf:

Cincinnati is a good option to look into. The city has an annual output of $132 billion and a heavy concentration of Fortune 500 companies, making it a top economic metro. Homes are still meeting 1% rule there as well.

Thank you I will check Cincinnati out.

1 Reply

Christie Gahan

Investor · Hillsboro, OR · Member since 2016 · 304 posts · 153 votes

2y

Put some time in to tightening down those numbers. Get with a mortgage broker, or two, and see what you qualify for in terms of a new home loan. Ask about rate buy downs etc. Get some solid numbers on what a payment would be. If you keep your rental, it will affect your debt to income ratio. You may have no choice but to sell your current home. Also, look at what your rental income might be. How much of that income will the mortgage companies allow you to use as income on the loan application?

I would not piddle around with a rental. Even if you can rent it for $800 more then the payment, that does not mean you will be putting $800 a month in your pocket. If prices go up 10% on your hobby farm that is $50k. Your rental is gonna make you $5k. If you want the farm, you need to focus 100% of your finances on getting the farm. You can circle back and get investments later on if you want. (Like when the kids are older and can help paint.) You are making too much importance on your 3% rate.

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Jessie Dillon

Investor · Hopedale, MA · Member since 2021 · 321 posts · 212 votes

2y

my first thought is to use the 75k heloc to BRRRR as fast (and as well) as you can in a low cost market! but there are missing pieces of information that would make this a great or not-so-great idea, like your skill set, the amount of time you can dedicate to RE weekly.. BRRRRing can be done remotely for sure, but is more project-management-heavy than a turnkey buy and hold property. if you could BRRRR STRs or MTRs that would be even better! i have a great contact for bridge financing too if you need a lender to help with projects like this. excited for you guys!

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Christie Gahan

Investor · Hillsboro, OR · Member since 2016 · 304 posts · 153 votes

2y

I find it strange that you are concerned about the hobby farm payment to be a little tight but are okay with the risk and expense of buying a second property.

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Christie Gahan:

I find it strange that you are concerned about the hobby farm payment to be a little tight but are okay with the risk and expense of buying a second property.

Because for our area, a fixer upper house and acreage is around $450k-$500k all said and done once repairs are made. To buy a starter home, we could get in at around $350-375k. Our “why” for investing in real estate is to work our way towards the farm, we’re just trying to figure out how to best utilize our resources to get there without being completely house poor in the future. We’re trying to figure out if we can get closer to that goal by riding the equity/appreciation train up as our market continues to grow, or focus on the cash flow that out of state rentals would bring. Because investing in real estate in general seems to offer more of an advantage than just stockpiling extra money from our W2 job into a high yield savings account.

But maybe I’m viewing that wrong… which is why I posted looking for advice from people who have more experience than I do. I appreciate your input, I will definitely need to run some numbers with a mortgage broker.

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Jessie Dillon:

my first thought is to use the 75k heloc to BRRRR as fast (and as well) as you can in a low cost market! but there are missing pieces of information that would make this a great or not-so-great idea, like your skill set, the amount of time you can dedicate to RE weekly.. BRRRRing can be done remotely for sure, but is more project-management-heavy than a turnkey buy and hold property. if you could BRRRR STRs or MTRs that would be even better! i have a great contact for bridge financing too if you need a lender to help with projects like this. excited for you guys!

Thank you!

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David M.

Morris County, NJ · Member since 2020 · 5k+ posts · 2k+ votes

2y

@NA H.

For the "short" timeframe and the given market conditions, you need to lay this out more closely. Lots of people lose money in real estate. You just don't hear about it. Even the "successful" ones (or any investor for that matter) lose money, but they just win more than they lose. In your case, you have very limited room to lose.

https://www.biggerpockets.com/forums/48/topics/1159104-overl... you might want to take a look at this very long thread. Becca put it all out there, and we've had some varied/insightful comments.

I think it was mentioned to trade out of your current home so you can take everything tax free. Is the one acre property too tight if you use all your capital?

Quite honestly, depending on your resources and projected future income, you might consider other investments to help bolster your income. I am assuming that "tight" means you can at least make the payments. So, you just need a little bit more income to live "nicely" and have some buffer. Generally, equity real estate investments are large, all-or-nothing, deals.

for opt1, its up to you if you want to bank on appreciation. however, why wouldn't the farm have appreciated as well. You need to get ahead somehow.

Good luck.

1 Reply

NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @David M.:

@NA H.

For the "short" timeframe and the given market conditions, you need to lay this out more closely. Lots of people lose money in real estate. You just don't hear about it. Even the "successful" ones (or any investor for that matter) lose money, but they just win more than they lose. In your case, you have very limited room to lose.

https://www.biggerpockets.com/forums/48/topics/1159104-overl... you might want to take a look at this very long thread. Becca put it all out there, and we've had some varied/insightful comments.

I think it was mentioned to trade out of your current home so you can take everything tax free. Is the one acre property too tight if you use all your capital?

Quite honestly, depending on your resources and projected future income, you might consider other investments to help bolster your income. I am assuming that "tight" means you can at least make the payments. So, you just need a little bit more income to live "nicely" and have some buffer. Generally, equity real estate investments are large, all-or-nothing, deals.

for opt1, its up to you if you want to bank on appreciation. however, why wouldn't the farm have appreciated as well. You need to get ahead somehow.

Good luck.

Thank you for your insight! I will definitely check out that post!

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Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

2y

@NA H.

you may get people chiming in with advice on Kansas City or other out of state markets that they want to recommend to you, but I am going to be blunt.

it is very, very difficult to cash flow right now unless you are using some kind of creative strategy (or combination of strategies).

you might be able to use your HELOC to buy 1-2 properties... but if you use a HELOC for the DP + a mortgage, that will likely be so expensive that you won't cash flow at all and will be negative every year.

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NA H.

OP

New to Real Estate · Boise, ID · Member since 2024 · 12 posts · 6 votes

2y

Quote from @Nicholas L.:

@NA H.

you may get people chiming in with advice on Kansas City or other out of state markets that they want to recommend to you, but I am going to be blunt.

it is very, very difficult to cash flow right now unless you are using some kind of creative strategy (or combination of strategies).

you might be able to use your HELOC to buy 1-2 properties... but if you use a HELOC for the DP + a mortgage, that will likely be so expensive that you won't cash flow at all and will be negative every year.

I appreciate you being blunt. That’s helpful, thank you

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Basit SiddiqiBusiness Member

Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes

2y

I like option #2 but you might not be able to buy too many homes with just $75,000.

You might be able to get into some decent properties in the $200,000 range in those cities which would require 20% down which is $40,000.
If you had $25,000 ontop of the $75,000 HELOC, you might be afford the downpayment, closing costs and a small rehab budget.

Best of luck!

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Alecia LovelessPro Member

Member since 2019 · 3k+ posts · 2k+ votes

2y

@A H. You don’t mention what your current income level is between you and your spouse with regards for the potential to help subsidize this entire endeavor.

Working hard for the next 2-3 years and possibly one of you working a second job or having a side hustle might allow you enough money to get enough real estate to cash flow to support your new mortgage on the acreage.

I’ve managed to build a portfolio of 7 properties with 25 units over the past 4 years on a small salary and a little income from the sale of a business. It currently cash flows $6500/month which would make a decent mortgage payment.

I hate to tell you to wait 5 years because I really think if the farm is your dream you should figure out a way to get there ASAP, but if you can get your HELOC working for you by buying some rentals and start to build up some passive income each month then you're that much closer to being able to afford your acreage.

I do believe if you’re not set on Idaho and living right near Boise that there’s many cheaper places to buy land, possibly even in Idaho. However, I know you could get 10 acres and a 3/2 house here in New Hampshire for $350,000 if you spent some time looking and were willing to move across the country. I’m sure there’s other options around the country that are cheaper than that.

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Milton ChamberlainPro Member

Real Estate Agent · Kansas City, MO · Member since 2019 · 235 posts · 107 votes

2y

Option 1: buy another “starter” home for around $375k and plan to live in it for around 5 years while renting out the current house. Hopefully by the end of that time frame, it will have appreciated enough that we can sell it and use the equity as a down payment on some acreage while still keeping the first house as a rental.

Looks like average home SOLD price increase 5% last year (in Boise)? If that is right? Not a bad plan if you are confident in that continuing IMO...time is your friend. We had around 3-6% appreciation in KC metro depending on the county (5 main counties make up the KC metro)

Option 2: stay where we are and use the heloc to invest in rental properties out of state like Kansas City, Cleveland, etc. Over the next few years continue to buy a few more properties to build up the monthly cash flow then use the increased income to buy our acreage property.

IMO, the only place you can immediately cash flow in KC is by buying a distressed property in a C market and putting money in to fix it up. Hard to come by, and difficult OOS. Also, due to KC mayor creating this ordinance, which to highlight and summarize includes:

bans discrimination against tenants based solely on:

"-Source of income from an occupation, including gig work or paying rent in cash
-Use of public programs like Section 8 Housing Choice Vouchers, disability checks, or social security
-Poor credit score
-Prior evictions and alleged damages older than 12 months (less than 12 months can be a basis for denial)
-Prior convictions or arrests (sexual and violent crimes are excepted, a landlord can still deny based on these convictions)

-The ordinance also requires the city to proactively scan for rental ads using discriminatory language like “no Section 8” or “no past evictions”.

-Landlords who are found to be in violation of the ordinance with respect to source of income can be fined up to $1,000 per incident. There is a prohibition against posting the landlord’s names if they are found to be in violation of the ordinance."

many investors are avoiding the actual city of Kansas City and instead investing in the surrounding townships and suburbs (which will not have to adhere to these new 'anti-discrimination' rules)

Our area is projected to continue to grow and appreciate fairly quickly so we are afraid of getting priced out of buying our little farm if we wait too long. What would you do in our situation? Any other ideas or food for thought? Thank you for your advice and taking the time to read this!

I agree, my market has continued to appreciate well (+7% 2022, +5-6% 2023), and will continue to do so as the KC metro has A TON of development and investment going on, particularly N of the river. I think your plan of buying a second home in your market and renting the first, and building equity over five years is a great idea.

If you want to see some 'case studies' of available investment properties (with financial analysis) in the KC metro, as well as some additional info and stats, I am happy to discuss with you. reach out anytime.

[email protected]573-356-1607

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Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

2y

@Milton Chamberlain

100 votes for providing a reality-based response.

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Working towards our “why”

Working towards our “why”

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