Should You Buy Your Own House or An Investment Property First?

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My brother just graduated from college, got a job, and is getting out into the “real” world. The other day he called me up and told me he was going to start looking to buy a house, and since I know a thing or two about real estate, he asked me if this was a good idea.

In short, I told him no. First off, I told him instead to buy a rental property or try some type of investing such as wholesaling real estate. With the amount of money he’s making (which isn’t much) he shouldn’t go buy a house which he can barely afford and then have no money left over for investing (of any type).

What he should do is buy a multi-unit and live in one of the units . . .

Or buy a quality rental property, or as I just mentioned, do some wholesaling. In the mean time, while he’s making money from these ventures he should be living as cheaply as possible.

In other words, unlike the majority of (broke) Americans he should delay instant gratification and make a bunch of money from real estate investing so he can put a significant down payment or even pay cash for a house a few years from now.

When I was a new investor I lived on next to nothing while plowing all of my money into my business. In fact, I lived in some real dumps where even my friends didn’t like to come visit (But I didn’t really care, I was planning for the future.) Looking back, it saved me a ton of money, which I put towards marketing and allowed me to substantially grow my business to the point it is today.

So, if you happen to be new and just starting out, I would avoid buying a house until you have some success as an investor. As many people will tell you these days, owning your home is overrated. I realize it’s the American dream and all, but to me and many other investors it’s just four walls and a roof and a great way for us to make money.

In fact…

If it weren’t for my lovely wife I wouldn’t care where I lived and I’d be fine in some small condo. (That’s probably true for most guys I know, so I guess its good we have women or there would be no single family houses in the world.)

One last thing. Let’s say you do have $10,000 saved for a down payment on a house. These days that’s nothing and most likely you won’t even be able to get a loan with that amount of money. But if you invested that in marketing (letters and postcards), networked at local REIA meetings and went out at 6am and passed out flyers….

Then you could turn that $10,000 into as much money as you want. There are many investors (myself included) who started with just a couple grand and parlayed it into hundreds of thousands of dollars.

Photo: Matthew Rutledge

About Author

Jason R. Hanson is the founder of National Real Estate Investor Month and the author of “How to Build a Real Estate Empire”. Jason specializes in purchasing properties “subject-to” and has purchased millions of dollars worth of property using none of his own cash or credit.


  1. Jason,

    Great article and honestly it’s something that I really believed too but then several years ago when I had that money and was planning on building for investment or buying a fixer as my first home, I foolishly did the opposite as I was getting married and wanted to establish our home.

    Your las paragraph got me thinking and I am saving again to be able to start investing in real estate. Can you lay out some strategies you might follow in today’s economy if you had $10k starting out to invest? In the current finance climate and housing market my original plan of building and holding for two years to sell for profit isn’t the best plan.

  2. Julie Marquez

    I bought an investment before I bought a primary residence. The SFR is a great investment, but could also be my home if I lived in that area. I choose live an hour away and be closer to downtown Seattle for work, and so I rent my primary studio home.

  3. Robert Nicolai

    Great discussion! However, I disagree with the notion that you cannot buy a home to live in for <$10,000… Why not use that money and an FHA loan to purchase yourself a home to live in? In many places, you could spend half of that on a residence and pay a mortgage equal to or less than it would cost to rent. That would leave the other half to begin investing in a wholesaling or flipping business.

    Now, I do think buying a multifamily and living in one unit while renting the others is a great concept (that would be my preferred move), but it is unrealistic in some markets.

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