Primary residence vs Rental cash flow ?

Question

Hi all,

I have a big concern regarding buying a primary residence vs investing in rental property (single family homes in central states) ?

Here is our situation: me and my husband live in Southern California and currently rent 2 bedroom apartment for $2700/month. We are thinking to purchase primary residence first that would be equivalent to our current rent and then invest in rental property (outside of California). Now we are thinking if we can find primary residence in our area, rehab it and do a HELOC on it which will give us a chance to buy first rental property. Does it make sense to follow such scenario ? Any input would be highly appreciated !

Tatiana Portnyagina · Answer

@Stephanie Trevizo Thank you very much for help! We started our search already and there is definitely some opportunities available for us ;)))

Josue Vargas · Answer

Renting vs buying... Go for buying!

Now HELOC stuff... Unless you have a strategy, I would be very careful.

Honestly, and me personally, I thought about having a HELOC on my primary residence about 4 years ago.  The issue for us was "peace of mind", strategy #Z if you want to call it that way.  I told my "wife/partner in crime" we need to provide a safe roof for years to come for our children, and investing in such way by taking leverage on our primary residence is like to start over with our primary mortgage--day 0.  Not for us, not telling you lot of people take advantage of this.  Ultimately, it can be very rewarding, but if for some reason, sudden market change, etc. and if you can't pay the investment loans, they will come after your primary property.  Otherwise, doing different things, chances are you can repay at full capacity (somewhat) if something goes wrong with your new property investments (without a HELOC) assuming 20% down, etc. or other type of protection.

Craig Jones · Answer

@Tatiana Portnyagin

That's the million dollar question I'm working on as well! My recommendation is reading the book on understanding market changes that's recommended on BP. Its the next book I'm going to be reading but let's hope the market doesn't drop too bad if it does at all. Might be some great forms on here that would be helpful as well

Tatiana Portnyagina · Answer

@Craig Jones Thank you for your answer!

I also have one more concern if the maker will go down for some time sooner or later( it’s not going to affect my rental property since we are not planning to buy it for appreciation but it will definitely affect my primary residence.

Stephanie Trevizo · Answer

Hi @Tatiana Portnyagina, I agree with Craig. Buying a primary residence that you fix up may be the best route. You can then leverage your equitey. In Irvine, with 20% down you should be able to find a good condo where the payment including HOA would be equivilant to your rent. If you're open to moving a little farther, house hacking a multi-family is always a good option as well.

My recommendation would be to speak to a lender to find out what your price point would be for the desired mortgage. Then have a look at the properties on the market, this way you know whats out there and you could confidently decide the best next move for you two. If you'd like some lender recommendations, feel free to reach out. Good luck!

Craig Jones · Answer

@Tatiana Portnyagina

Definitely sounds like a good strategy for sure. Theres many manys to go about it but simply if you are going to be paying around 2700 a month in rent you never see that money again. If you buy a property, rehab it probably end up with a cheaper payment which will be going towards your investment instead of someone else's. Then you can go many different routes in acquiring your first rental property from there with the equity.  That's just my 2 cents and the route I went and it's working out so far!

Good luck!!