Investing While House Hunting?

Question

Hello Everyone! Real estate newbie investor reporting in. I have been doing a ton of research on real estate investing outside of this website (books and podcasts mainly) and I'm ready to start to hit the ground running into finding my first property.

My question to all of you is in relation to financing.  Right now, both me and my wife are house hunting for our next primary residence (as we are starting to grow out of our current starter home) but I also want to start getting into investing into real estate and purchase my first property.  Is this doable?  Will our options in terms of what we qualify for in terms of a mortgage for our primary residence be hindered by me trying to purchase my first property or (more importantly) owning an investment property? Is it better to wait until we close on our new primary residence before I go and search for my first investment property? I hope this question makes sense. Any and all advice you can pass along would be great.  Just want to get started ASAP and I don't want to wait.

Matt Lentz · Answer

That's really a question for your mortgage lender, the different scenarios.  My investment properties are owed and operated under an llc.

In my 9 years experience there's never perfect timing for investment properties. Life, kids, work, lack of time, ect. We just jumped on cash flowing deals when we could and when it made sense to do so.

You don't always have to make a deal, but be ready and have everything figured out for when that day comes. The hardest part is getting started. Sounds like you have ambition and drive, you'll do just fine.

Nick Harris · Answer

The best way to knock both out in one transaction would be to househack. I am not sure if this is something you guys have talked about but that would be my first recommendation as you get both your primary residence and investment property in one transaction.

Outside of that, I would make sure to check with your lender on your current DTI situation and whether you have room within that to take on two new mortgages. They will better be able to help with the numbers and tell you whether or not you are able to do both and what the steps are that you need to take

Michael Dumler · Answer

@Jeremy Browe, I agree with Nick, for your current situation I would highly recommend looking for a house hack deal. Keep in mind, that you don't only have to pursue 2-4 unit properties to house hack. If you could identify a property with an in-law suite or an ADU that could be used as an STR via Airbnb, that would be a great way to bring in additional income and start your real estate investment portfolio. As others have alluded to, your next best step is to check with your lender to get clarity on your DTI and if you could potentially carry two mortgages. Furthermore, have you considered turning your original primary residence into a rental after purchasing your new home? This too can be a great way to start building your portfolio and allows for an easy transition into real estate investing. Hope this helps!

Zierry Eme Carl T. Tagbas · Answer

Hello @Jeremy Browe! welcome to BP! As few people comment on your post, house hacking would be the best route if you want it as your primary residence plus as an investment property. My always number one advice for anyone starting tho is to find a mentor that matches what you are trying to achieve in real estate. Did you know anything about using an FHA and purchasing a duplex/triplex/fourplex?

Hey good luck out there! Feel free to connect with me if you have any questions!

Andrew Freed · Answer

@Jeremy Browe - I agree with all of the previous feedback. I believe your easiest route would be to house hack a 2-4 family with a low down payment loan.

Additionally, do you have significant equity in your first primary? If so, you might consider opening up a HELOC prior to leaving for another property. HELOCs are amazing tools because they have extremely low interest rates compared to other lending products and usually the first 10 years are interest only. You also can only open a HELOC (compare to a RELOC) while its your primary which result in more favorable terms. By having this line of credit available, it'll allow you to scale with your own equity as needed and not just sit on cash (via a cash out refinance) and let inflation eat it away. You can even be your own hard money lender if you wanted at much more favorable rates if you were considering doing a BRRRR or a flip.

One of my primary strategies is house hacking a multi every year or two and prior to leaving, opening up a HELOC so I can access the equity as needed. Then use this equity to scale even further. Be it reserves, down payment on a house, whatever I see fit. It just allows a ton of flexibility with your finances.

Investing While House Hunting?

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