First family home or real estate investment?
Member since 2024 · 10 posts · 16 votes
First family home or real estate investment?
Most Popular Reply
Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes
2yQuote from @William Hochstedler:
Quote from @Tim Ryan:
What did Kiyosaki say? Your home is a liability and an investment is an asset.
https://www.richdad.com/your-house-is-not-an-asset
I prefer the quote from The Richest Man in Babylon, "Make of thy dwelling a profitable investment." In other words, take advantage of all of the benefits granted to home owners including lending, zoning, and taxes. But treat it like an investment. House hacking is just planning to repeat this process.
Also, learning home ownership on your own house is much more forgiving. Houses are complex systems where lots of stuff can go wrong and there are lots of opportunities for improvement. Experiencing these first hand in your own home provides greater flexibility while you figure this whole racket out.
Thirty years ago, I was fascinated by real estate opportunities in an emerging market (Brooklyn) and spent lots of time looking at cool warehouse space in places that are now 30-50 X the price. But I never acted because I didn't have the money, knowledge or confidence to pull the trigger. It was only after I got to Utah and purchased my primary residence (and got a real estate license) that it all started to click. I had to have the visceral experience of committing to a 30 year obligation was 5 times my annual salary and then watch it work out relatively risk free (because I have to live somewhere) to feel comfortable making multiple six-figure commitments. So I advocate home ownership as the first step.
The most important thing is action. The best time to buy real estate (and plant trees) is 20 years ago. The second best time is today.
I bought a home for my family years before I ever thought about investing. But here's a story I love to tell.
I bought a 42-Unit Apartment Complex in Chattanooga a number of years ago. I set out to hire onsite managers. A younger couple replied and I hired them and they moved into Unit 18. They were good managers. About a year in they asked for my advice about them buying a house. I recommended they buy investments first. I truly didn't mind if they had bought a home as I would have let them manage remotely. But I was telling what I would do in their situation.
Long story short, they ended up buying two duplexes. Once they got pregnant with twins they decided to move on from the managing and they bought their primary home.
I visited them and saw their house. At this visit they thanked me profusely saying all of their friends were very stressed for years trying to save for a house, get financing, and making those mortgage payments. They told me they had little stress at this point, and by the time they were ready to buy the bankers used the income from the rentals, the process was easier, and they got a much better house than they ever thought.
A success in reverse order (but why reverse? who says?)
How about this: Let's make "Rental Property Ownership" the New American Dream!
15 Replies
- Investor · Fort Lauderdale, FL · Member since 2013 · 929 posts · 615 votes2y
I didn't have the cash to buy a primary residence so started with cooperative assignments. Sort of like a fix and flip but without the drudgery of fixing. This enabled me to raise cash from the assignment fees. From there I was able to pursue other strategies, including purchasing my primary residence.
- Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes2y
This is a great question in my opinion because I believe in many cases, people should buy an investment property before their primary home.
If you ask your banker, your older parents or grandparents, realtor, financial manager etc. they will all say "of course buy your primary". That's because that is all they know and somehow there is a status symbol attached to it.
What did Kiyosaki say? Your home is a liability and an investment is an asset.
Lot's to learn on this subject. First step is to not worry about what others think. Do what makes sense for you. Building wealth should be a priorty.
- Member since 2024 · 10 posts · 16 votes2y
Quote from @Tim Ryan:
This is a great question in my opinion because I believe in many cases, people should buy an investment property before their primary home.
If you ask your banker, your older parents or grandparents, realtor, financial manager etc. they will all say "of course buy your primary". That's because that is all they know and somehow there is a status symbol attached to it.
What did Kiyosaki say? Your home is a liability and an investment is an asset.
Lot's to learn on this subject. First step is to not worry about what others think. Do what makes sense for you. Building wealth should be a priorty.
Thank you for this! Somehow I know my priority is to build wealth and that I should start investing first, but just needed to hear it!
- 2yKiKi ChaseBusiness MemberReal Estate Agent · Indianapolis, IN · Member since 2022 · 184 posts · 75 votes
We just bought a SFH home because of our budget, but I totally wish we would have house hacked!
Brentwood Collective54 Reviews - Member since 2024 · 10 posts · 16 votes2yMaybe refinance in a few years and buy your first investment using the money you’re going to get out of refinancing? Or use equity? Either way, you now have a home and can take leverage :)
Quote from @KiKi Chase:
We just bought a SFH home because of our budget, but I totally wish we would have house hacked!
- Lender · Seattle, WA · Member since 2022 · 482 posts · 768 votes2y
I started off from House hacking by putting 3.5%-5% down payment and rent out the other vacant rooms/units just to lower my mortgage payment. You just have to make sure once you vacate your primary and converting into a rental, how would your DTI (debt to income ratio) be effected. Since lenders can only lend up to 50% of whatever your gross income is assuming no debt.
- Member since 2024 · 10 posts · 16 votes2y
Quote from @Matthew Kwan:
I started off from House hacking by putting 3.5%-5% down payment and rent out the other vacant rooms/units just to lower my mortgage payment. You just have to make sure once you vacate your primary and converting into a rental, how would your DTI (debt to income ratio) be effected. Since lenders can only lend up to 50% of whatever your gross income is assuming no debt.
Good to know about this since I’m definitely planning to scale in the future! Thank you for this insight! I shall look more into it!
- Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes2yInteresting. This is a mindset argument, not a financial one. It falls apart completely if you think of yourself as as tenant and pay yourself rent (that you would otherwise be paying someone else).
Quote from @Tim Ryan:
What did Kiyosaki say? Your home is a liability and an investment is an asset.
https://www.richdad.com/your-house-is-not-an-asset
I prefer the quote from The Richest Man in Babylon, "Make of thy dwelling a profitable investment." In other words, take advantage of all of the benefits granted to home owners including lending, zoning, and taxes. But treat it like an investment. House hacking is just planning to repeat this process.
Also, learning home ownership on your own house is much more forgiving. Houses are complex systems where lots of stuff can go wrong and there are lots of opportunities for improvement. Experiencing these first hand in your own home provides greater flexibility while you figure this whole racket out.
Thirty years ago, I was fascinated by real estate opportunities in an emerging market (Brooklyn) and spent lots of time looking at cool warehouse space in places that are now 30-50 X the price. But I never acted because I didn't have the money, knowledge or confidence to pull the trigger. It was only after I got to Utah and purchased my primary residence (and got a real estate license) that it all started to click. I had to have the visceral experience of committing to a 30 year obligation was 5 times my annual salary and then watch it work out relatively risk free (because I have to live somewhere) to feel comfortable making multiple six-figure commitments. So I advocate home ownership as the first step.
The most important thing is action. The best time to buy real estate (and plant trees) is 20 years ago. The second best time is today. - Investor / Mentor / Contractor · Arcadia, CA Buying Out of State · Member since 2015 · 655 posts · 622 votes2yTwo schools of thought. The point I want to make is this. Society for decades has said, "of course buy your primary as a first step". I'm saying that's not for everyone and I'm thinking more and more people should think long and hard about the possibility of owning rentals first. Either way that first purchase is difficult.
Quote from @William Hochstedler:
Interesting. This is a mindset argument, not a financial one. It falls apart completely if you think of yourself as as tenant and pay yourself rent (that you would otherwise be paying someone else).Quote from @Tim Ryan:
What did Kiyosaki say? Your home is a liability and an investment is an asset.
https://www.richdad.com/your-house-is-not-an-asset
I prefer the quote from The Richest Man in Babylon, "Make of thy dwelling a profitable investment." In other words, take advantage of all of the benefits granted to home owners including lending, zoning, and taxes. But treat it like an investment. House hacking is just planning to repeat this process.
Also, learning home ownership on your own house is much more forgiving. Houses are complex systems where lots of stuff can go wrong and there are lots of opportunities for improvement. Experiencing these first hand in your own home provides greater flexibility while you figure this whole racket out.
Thirty years ago, I was fascinated by real estate opportunities in an emerging market (Brooklyn) and spent lots of time looking at cool warehouse space in places that are now 30-50 X the price. But I never acted because I didn't have the money, knowledge or confidence to pull the trigger. It was only after I got to Utah and purchased my primary residence (and got a real estate license) that it all started to click. I had to have the visceral experience of committing to a 30 year obligation was 5 times my annual salary and then watch it work out relatively risk free (because I have to live somewhere) to feel comfortable making multiple six-figure commitments. So I advocate home ownership as the first step.
The most important thing is action. The best time to buy real estate (and plant trees) is 20 years ago. The second best time is today.
I bought a home for my family years before I ever thought about investing. But here's a story I love to tell.
I bought a 42-Unit Apartment Complex in Chattanooga a number of years ago. I set out to hire onsite managers. A younger couple replied and I hired them and they moved into Unit 18. They were good managers. About a year in they asked for my advice about them buying a house. I recommended they buy investments first. I truly didn't mind if they had bought a home as I would have let them manage remotely. But I was telling what I would do in their situation.
Long story short, they ended up buying two duplexes. Once they got pregnant with twins they decided to move on from the managing and they bought their primary home.
I visited them and saw their house. At this visit they thanked me profusely saying all of their friends were very stressed for years trying to save for a house, get financing, and making those mortgage payments. They told me they had little stress at this point, and by the time they were ready to buy the bankers used the income from the rentals, the process was easier, and they got a much better house than they ever thought.
A success in reverse order (but why reverse? who says?)
How about this: Let's make "Rental Property Ownership" the New American Dream! - Broker · Logan, UT · Member since 2013 · 1k+ posts · 1k+ votes2yThis is an excellent point. A local broker made all of his kids buy fourplexes as their first home. Needless to say, that's treated them very well over the years.
Quote from @Tim Ryan:
Long story short, they ended up buying two duplexes. Once they got pregnant with twins they decided to move on from the managing and they bought their primary home. - 2yJake AndronicoBusiness MemberRealtor · Reno, NV · Member since 2019 · 1k+ posts · 938 votesPrimary home and rented out the rooms. Not glamorous, sexy, or fun, but completely changed my life.
Quote from @Gladys Villa:
How did you all start in real estate? Did you buy your primary home plus house hacking it? Or bought a primary home and took out some cash from equity to buy a second home for investment? or let go of the primary home idea for the mean time and went straight to real estate investing?
- Rental Property Investor · Austin · Member since 2022 · 33 posts · 11 votes2y
Quote from @Gladys Villa:
How did you all start in real estate? Did you buy your primary home plus house hacking it? Or bought a primary home and took out some cash from equity to buy a second home for investment? or let go of the primary home idea for the mean time and went straight to real estate investing?
Buying a property in my city was too expensive at the time but I still wanted to own real estate so I found an investment opportunity a few hours away. I also found a more experienced investor to partner with on this deal so it was a great way to learn and prepare myself for owning my own property. As many have stated, there are multiple ways to get started!Buying a primary residence in my city was too expensive at the time but I still wanted to own a property so I found an investment opportunity a few hours away. I also found a more experienced investor to partner with on this deal. As many others have shared, there’s multiple ways to get started!
Buying a primary residence in my city was too expensive at the time but I still wanted to own a property so I found an investment opportunity a few hours away. I also found a more experienced investor to partner with on this deal. As many others have shared, there’s multiple ways to get started!
Buying a primary residence in my city was too expensive at the time but I still wanted to own a property so I found an investment opportunity a few hours away. I also found a more experienced investor to partner with on this deal. As many others have shared, there’s multiple ways to get started!
Buying a primary residence in my city was too expensive at the time but I still wanted to own a property so I found an investment opportunity a few hours away. I also found a more experienced investor to partner with on this deal. As many others have shared, there’s multiple ways to get started!
- 2yJerrod RosenPro MemberReal Estate Broker · Denver · Member since 2020 · 77 posts · 35 votes
House hacking your primary home and repeating the process every year or two is the easiest and safest way to build long term wealth through time.
- 2yWale LawalBusiness MemberReal Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
House hacking, primary home purchase and leveraging equity, direct investment in rental properties, and hybrid approaches are all strategies for property management. House hacking offers reduced living costs and hands-on experience, while primary home purchase and leveraging equity offers homeownership and appreciation. Hybrid approaches offer flexibility, incremental growth, and complex planning.
Good luck!
NETWORTH BUILDERS5236 Reviews - 2yDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
@Gladys Villa tell us a better way to get started than buying a 2-4 unit property with an FHA mortgage, FHA 203(k) if it needs rehab, then living in one unit and renting out the rest.
You can also rent out the other bedroom(s) in the unit you occupy for more income.
After one year, you can repeat the process.
Logical Property Management4.9462 Reviews
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