Should you buy your first home first, or investment property?
Hey all, first time posting on here. I have a quick question. My wife and I are thinking about buying our first home soon but I was wondering what your thoughts are about buying your first home before your first investment property?
I have not used my first time homebuyers credit but i will make sure to use it on a multifamily first....making my first property an investment
I've been house hacking a duplex for 4 years now and I couldn't recommend anything above that. I think it depends on your savings rate and your goals. If you can purchase a house (PITI, maintenance, decorating, furnishing, etc) and saved $1000+ plus per month then get a house first. However if you can reduce your living expenses to as low as possible (house hacking is a common method), then your options will be greater than you may imagine. Living in a duplex is NOT as cool as many of my friends houses. However I can live off my rental income after 4 years; all due to no living expense has allowed me to save additional down payments. The rest of my life, my rental income (not my W2) will pay for whatever house I want. Which I think is cooler than living in a cool house in my 20s.
+1 for any of the house hacking BiggerPockets books. Set for life, Housing hacking, etc.
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I second @Andrew S. -- The House Hacking Strategy, How to Invest in Real Estate, and Set for Life (newly revised!) would all be great options for you to read! You can find them all at www.biggerpockets.com/store
@Pax Magaway hello!
If your goal is to build portfolio take advantage of First time homebuyer programs & grants and look into getting 2-4 unit property. In our state we work with $10,000 + down payment assistance programs, you get to keep more money in your pocket and save faster for the next property 🙃
Quote from @Andrew S.:
I've been house hacking a duplex for 4 years now and I couldn't recommend anything above that. I think it depends on your savings rate and your goals. If you can purchase a house (PITI, maintenance, decorating, furnishing, etc) and saved $1000+ plus per month then get a house first. However if you can reduce your living expenses to as low as possible (house hacking is a common method), then your options will be greater than you may imagine. Living in a duplex is NOT as cool as many of my friends houses. However I can live off my rental income after 4 years; all due to no living expense has allowed me to save additional down payments. The rest of my life, my rental income (not my W2) will pay for whatever house I want. Which I think is cooler than living in a cool house in my 20s.
+1 for any of the house hacking BiggerPockets books. Set for life, Housing hacking, etc.
@Andrew S. this is great, and what we’re thinking/looking into! I know I want to set us up for success starting out and build to adding to our portfolio!
Quote from @Anastasia G.:
@Pax Magaway hello!
If your goal is to build portfolio take advantage of First time homebuyer programs & grants and look into getting 2-4 unit property. In our state we work with $10,000 + down payment assistance programs, you get to keep more money in your pocket and save faster for the next property 🙃
@Anastasia G. that's awesome, thanks for passing that along. Yeah I was looking into FHA loans to get the down payment low and house hacking like a duplex or triplex from the start.
@Pax Magaway- I recommend that your first home is your primary residence because 1) it takes a lesser dollar amount 2) you wont need to be concerned with ROI 3) you will learn by experience and if you make any mistakes - you wont have it affect tenants 4) if all goes well you will be able to flip it to a rental in the short future
Quote from @Katie Miller:
I second @Andrew S. -- The House Hacking Strategy, How to Invest in Real Estate, and Set for Life (newly revised!) would all be great options for you to read! You can find them all at www.biggerpockets.com/store
@Katie Miller thanks for recommending those books I’ll definitely add them to my book list.
Quote from @Dave Skow:
@Pax Magaway- I recommend that your first home is your primary residence because 1) it takes a lesser dollar amount 2) you wont need to be concerned with ROI 3) you will learn by experience and if you make any mistakes - you wont have it affect tenants 4) if all goes well you will be able to flip it to a rental in the short future
@Dave Skow would you recommend house hacking starting out? Knock out two birds with one stone?
@Pax Magaway- sure - but maybe a smaller scale project ( like cosmetic upgrading ) versus a major hack ( like ripping down to studs and rebuilding )
Hey @Pax Magaway!
I would recommend getting your first investment property before your first home and taking advantage of an FHA loan or your first-time homebuyer credit this way you can build up equity and cash flow at the same time and give yourselves a low-cost way to get into things by utilizing the right loan. Otherwise, if it was the other way around it may be harder to get that second house and turn it into a investment property or you might have to get more creative with your investment using an HELOC or some other form of financing.
Hope this helps and if you have any more questions please don't hesitate to reach out!
All the best,
Josh
-
Real Estate Agent Pennsylvania (#RS364365 )
- 484-986-5012
- [email protected]
Quote from @Dave Skow:
@Pax Magaway- sure - but maybe a smaller scale project ( like cosmetic upgrading ) versus a major hack ( like ripping down to studs and rebuilding )
@Dave Skow I totally agree nothing too drastic right now I’ve been looking into duplex’s mostly and a few triplexes.
@Pax Magaway- good for you ...get pre approved ( if you havent already done so )
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#3 All Forums Contributor
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Whatever the best deal is.....and as you've already guessed, it may involve doing both A and B at the same time. But get aggressive with your searching and who knows? You may find a derelict old house in the historic district with good bones that will be a killer STR once you fix it up......?
Quote from @Pax Magaway:
Hey all, first time posting on here. I have a quick question. My wife and I are thinking about buying our first home soon but I was wondering what your thoughts are about buying your first home before your first investment property?
I'm a big fan of house hacking AS an investment. Especially with increasing mortgage rates and the opportunity to pay a smaller down payment for owner occupied (and lower mortgage rates for owner occupied vs investor rates). Just stay for at least one year if you need / want to move (please speak to your lender for professional advise). As always this is only my personal opinion. Best wishes!
#3 Managing Your Property Contributor
It honestly depends on where you live. In some areas it is cheaper to rent than to buy a home. If that is the case where you are, buy a rental in another city and keep renting. If the cost of owning vs renting are similar, buy your own home. Look for a place with a suite or a duplex. That way you can rent out part of the home (you can live in the suite and rent the main part of the home) and decrease your living expenses.
Quote from @Lucia Rushton:
Quote from @Pax Magaway:
Hey all, first time posting on here. I have a quick question. My wife and I are thinking about buying our first home soon but I was wondering what your thoughts are about buying your first home before your first investment property?
I'm a big fan of house hacking AS an investment. Especially with increasing mortgage rates and the opportunity to pay a smaller down payment for owner occupied (and lower mortgage rates for owner occupied vs investor rates). Just stay for at least one year if you need / want to move (please speak to your lender for professional advise). As always this is only my personal opinion. Best wishes!
Thanks for the advice! Looking into financing are there different down payments for multi family homes? For example is a down payment for a $100k duplex (just example numbers, taking into account well live in one and rent out the other) using FHA or 97 etc different than single family using the same FHA or 97 etc?
I started out investing in real estate before owning my first home to allocate capital for bigger returns. If you aren't in a rush to buy a home and feel like you have a passion for investing and growing cashflow then I would explore the investment side.
I would definitely recommend buying your first home, first. You can borrow a higher percentage of the home value if you are going to be occupying the home than if it is an investment. Then you can rent it out (up to 75% of your rental income can be used to offset that mortgage payment when you're qualifying for the new house) and move into the next home, again with the ability to borrow more since it's your primary residence.
A great option for investing is to buy a duplex or triplex, living in one of the units, and renting the other out. I'm happy to talk if you have more questions - congratulations on getting ready to make the big leap and buy your first home!!