Primary residence before investment property ?

Question

Wondering if I should be buying an investment property instead of a primary residence first. I am currently renting. Thoughts?

JD Martin · Answer

No. You should be buying a combination of the two, ideally, but if not that then you should be living as cheap as humanely/reasonably possible and buy an investment property first, financially speaking.

So you buy a duplex/triplex/quadplex and go from there.

Gregg Cohen · Answer

Robert Kiyosaki said it right in "Rich Dad, Poor Dad" when he said your primary home isn't your biggest asset...it's your biggest liability! Still, I do think there is a place in the decision for what makes your family happy beyond just the financial impacts.

Depends on where you live. If you are in a high priced market like California, it makes a lot of sense to rent there and buy rental properties in a strong cash flow/appreciation market like Jacksonville. You'll pay less in rent in CA than you would on your mortgage if you bought out there and you'd turn that capital into an increase stream from the positive cash flow you would earn on your Jacksonville rental properties.

If you live in a low priced market like Jacksonville, it still may make sense to buy rental properties before your primary.  I'd run the numbers for what the rent would be vs the house payment on primary home.  Then take into account the additional positive cash flow you would receive if you invested it in rental properties.

Right now, more than ever, I think it is a great time to consider buying rentals before your primary because interest rates are so low.  If you can use the capital you would've spent on a down payment on your primary to buy 3-5 rental properties with 4% interest on the loans or less, you've set yourself up to be on your way to financial freedom in the next 10-20 years.

Andrew Pokrzywinski · Answer

Hey @Lindsay Magnall welcome!!

I echo what Greg said in an earlier post. "Right now, more than ever, I think it is a great time to consider buying rentals before your primary because interest rates are so low.  If you can use the capital you would've spent on a down payment on your primary to buy 3-5 rental properties with 4% interest on the loans or less, you've set yourself up to be on your way to financial freedom in the next 10-20 years."

However, to add to that house hacking is such a powerful option to get your feet wet and accustomed to managing a tenant or tenants. I would talk to a lender first. It may not be as risky as you think. For example you could find a $500,000 duplex for fourplex (just making these numbers up) and occupy the property for a year and only put down 3.5 percent. For the same downpayment as putting 20% down on a rental property you could walk away with not only a place to live but a few extra units to get you started.

I would not rule out the idea of a partner as well that you could live with. BF,GF, friend etc etc.

Tyler Hungerford · Answer

If you don't have to come out 20% on a property, you can still find ways to cash flow or at least have most of your mortgage paid for. I've helped quite a few people in the SoCal market do that. They're coming in with FHA offers and getting stuff that almost pays for their entire payment. Might as well start getting paid to live somewhere rather than paying someone else's mortgage. Let those renters pay yours lol

Nadia O. · Answer

@Lindsay Magnall house hack will be your best bet. Im in CA as well. Prices are high right now. If you cannot buy a multi-family, do you know that you can always convert your primary to rental after 12 months? I would do after 2 years just to be safe. that's a WIN WIN right there! cheaper rate and Bam you get rental. And once you operate as rental, you can purchase another home as your primary. Good luck!

Lindsay Magnall · Answer

@Tyler Hungerford

Hi! Im in SoCal as well. Duplex just seems out of reach for me as I’ve been so focused on putting 20% down on a primary residence. Maybe put down less for multiple family dwelling??

Tyler Hungerford · Answer

Hi Lindsay, what part of CA are you in? I'm in SoCal and duplexes are a similar price to an sfr.

Lindsay Magnall · Answer

@Tyler Hungerford

Hi there. Thats something I have considered, but the price of a duplex (or bigger) is a bit out of my league.

Tyler Hungerford · Answer

Hey Lindsay. Why can't you house hack in CA? Maybe buy a duplex, rent out one unit and live in the other?

Lindsay Magnall · Answer

@Gregg Cohen

Thank you so much for that insight and makes perfect sense. I am in a high priced market (you nailed it with CA!), so I have been renting and living well below my means and think its time to make a move in investing. Just seems scary at first, but doing my research. Thank you!

Primary residence before investment property ?

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