Hello BP! I'm 21 years old. You might take this into consideration below....
Say I buy a duplex and house hack. What do you guys think is a better strategy.
1) I move out right now and buy a duplex, and put down 5% because it my first residence. I get to hang onto more cash because I'm only putting 5% down. Say my tenant pays off 50% of the mortgage monthly and I'm paying the other half and not cash flowing but I'm building equity. Or......
2) I keep saving my money with no debt to my name and buy a duplex in 3-5 years with 20% down and have enough cashflow to pay off my monthly mortgage.
What do you guys think is a better strategy?
If the duplex would cash flow with you in one side, or even break even I'd probably do it now, otherwise you could wait and theoretically put 5% down for your primary and 20% for a pure investment property.
I would buy it now, but take your time to find something where the numbers work. If you do it right, your tenant should pay more than 50% of your mortgage plus property taxes, etc. As you are in Canada and a first time buyer you might qualify for the government incentives.
@Steven Coppola Good on you for asking this question. Assuming you find a place in Windsor, Ontario, Canada, then buying now makes most sense. You should consider
1. that the rules to get a mortgage will get tighter so it may be a lot harder to quality in the future.
2. Appreciation is Windsor is higher than average.
3. You might not quality for the 5% FTH b/c if you buy a duplex, then it is considered an investment property and not a primary residence even if you live there. Connect with a mortgage agent to confirm this.
4. You might want to not live there and rent out both units, and you - yourself, rent somewhere else. This is because then, the whole cost of purchase and all the expenses will be a 100% tax deduction (include land transfer tax, legal, etc). Whereas if you live in 1 of the units, the only 50% is a tax deduction.
5. if you are going to get into RE investing, then you are doing to have to be comfortable with 'good debt'. Keep in mind the interest you pay on the investment property mortgage is a tax deduction, so take the fund from the bank and make another investment.
Don't forget to get a mortgage with a revolving HELOC.
With the expected growth in Windsor - you are best to buy now.
@Steven Coppola you buy the duplex now and start building equity. Further If you buy a duplex for, say, $300k, and windsor experiences 5%-10% appreciation as it’s been doing for the past several years, you can gain $15k-$30k in equity that way as well. You also get the tax benefits while paying down the mortgage and gaining experience purchasing, owning, and managing real estate.