Renting while owning?

Question

Short back story:  My wife and I sold our primary a few months ago and are currently renting.  We live in Los Angeles and are interested in buy and hold strategy with multi-family properties.

My question is do you think it's a bad idea to do buy and hold while we ourselves are renting elsewhere?  Naturally one might say to live in one unit of the investment property.  However the areas we are considering for the investment aren't areas we'd like to live in.  I guess my hesitation is due the fact that it seems counterintuitive to invest in buy and hold while we ourselves are paying rent to another landlord.  Now we don't plan on renting forever obviously but with our current capital we can either choose to start REI now and buy our primary later, or vice versa.

Any insight would be greatly appreciated.

Dawn Anastasi · Answer

I rented for a bit while owning 2 rentals.  However where I live, it's much cheaper to own versus rent.  I was paying $645 for a tiny 2 bedroom 1 bathroom apartment and then I owned paying $820 for a 3 bedroom single family home.  I'm much happier owning versus renting.

Erin A. · Answer

Hey @Jon S. ,

Congrats on deciding to take the REI plunge! How exciting! I have several thoughts to share.

1. How sure are you about buying in neighborhood that you wouldn't live in? Is it a matter of crime rate, distance from work, price point, architectural style?

2. Yes, I'd agree that common advice to new investors would be to live in one of the units of your multifamily property. It isn't necessarily "bad" or "wrong" to rent while building your portfolio... but I bet you'd come up with another down payment a lot faster if you didn't! It's also an added monthly financial obligation and might lower the amount of any financing you could get.

3. If you bought a SFR in a neighborhood you like, could you rent out the spare bedrooms or put them on Airbnb?

Good luck!

Account Closed · Answer

I rent because my job can require me to move at any time and its a big liability to buy and sell a house every time I get reassigned. I do own to rental units in my home country. Its about personal goals.

Elizabeth Colegrove · Answer

Everyone has a different opinion as you can see ;0

Is rent cheaper than you mortgage?

If you can rent significantly cheaper than you mortgage than renting is the better option.

We buy in the same areas we rent! For us we can put no money down and still have our expenses covered with a small margin to cover the "oh shoots" coming in. Therefore for "us" it makes sense having a personal residence, lower downpayment requirement and lower interest rate.

That begin said, if I could, I would buy a multi-plex in a good area. Therefore I get a cheap downpayment requirement (can still invest in other houses) plus others are paying for my housing.  I really like to do it all, own my house AND invest in other real estate.

Keely C. · Answer

Hi Jon,

I currently live in a rental apartment while owning a 3-unit building, both in Los Angeles.  The plan has always been to move in to my building so that I can pay that rent money to myself; I chose to buy in an area where I would like to live.  However, rent control laws in the area have prevented me from getting in very easily.  Luckily, the tenant in "my" unit pays me more than I pay out to my landlord, so that helps a little.  When you do decide on your strategy, make sure you have clear plans about exactly how and when you will transition out of your rental.

Peggy Liu · Answer

Jon Saputo

It all depends on your goals and what makes sense to you.  Erin made some really good points/questions.

Personally, I own out of state and rent here in LA.  Reason being, I just cannot afford to buy locally and I wouldn't want to live outside of the westside.  Plus, I have a extremely affordable rent that it definitely would not make sense to purchase something of my own. So it all boils down to your long term goals and what you would/can do to sacrifice for now to reach them.

Brian P. · Answer

Never think twice about what people think about if you rent. When my kids were in school I lived in a very nice area but when it was getting closer to the time for them to go to high school I moved to the top of the market, moneyville, and rented a mansion and the cost to rent the place was not a heck of a lot more then buying a home in a average neighborhood if you could call where I lived average. My new next door neighbor, the wife was the dean of admissions at the university my youngest son wanted to get into. He was a straight A student but even so the applications for the 168 spots in the program he wanted were over 12,000. He got in and I think my rental move was the reason. Plus it opened doors to new business meeting my neighbors on a informal social basis. I never would have bought a home there, not my thing.

Kyle Boughton · Answer

I have rented for many years while owning 3 rentals. Reasons being that I was closer to my job and got transferred a lot and that 2 of my rentals are in a college town and I get double the rent that I was paying to live at the time. It all depends on your situation and what works best for you.

John Ma · Answer

@Jon S.

I currently live in the Washington DC area (expensive like LA), yet my properties are in a different metropolitan area (roughly 200 miles away).   Whether if its a good choice or bad choice is completely up to you and what you want to do as an investor, but if you're just simply wondering if this is something that other investors do- Absolutely!

Don't limit yourself!  Just remember, there are investors from foreign countries that own rental properties in the US and have never seen their product.

Chris K. · Answer

I'd rent in a heartbeat! I own now and there are plenty of times where I tell myself if I could do it over I'd still be renting, or own a cheaper house and would have used the money available to buy investment properties. I wasnt as focused on investing when I bought my house as I am now, so now that I'm focused renting a house for myself wouldn't be out of the question. Plus I like the freedom of renting.

Renting while owning?

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