Rent and invest or buy and live?

Question

Hello,

I will admit that I'm pretty much just starting out in my research on real estate. Longer term, I would like to invest in real estate and build a property portfolio.

So far, I haven't seen how a rental property can product income in my area with rents being so low and property values being so high.

I'm trying to decide if I should continue renting and search for rental/income property or if my first real estate purchase should be my primary residence.

About me:
I'm single, no wife or kids.

I've been out of school for a little over 4 years. I'm a sales rep and so my salary has seen very steady increases. At this point in time I should make about $140k/yr. My only debt is my car ($50k). I currently rent for $1045/mo. About a year ago I paid off all of my debt so I've only been saving for about a year. I have roughly $15k in cash. Credit score of 793. I should be able to save about $2k/mo or so. I just started a new job so I'm still trying to get my budget and savings ability dialed in.

I live in Southern California and I want to stay in the general Long Beach area. I'm ok with staying where I am now and renting for another year or maybe two but I certainly would like to buy somewhere in the near future if it makes sense.

So that's me and I'm trying to do research so that I can decide what is best for me. I will continue saving money until it's time to invest but I want to put that money in the best place that I can.

Thanks for any help that you can offer! Also, I would appreciate, and use, any good internet resources that you can point me to.

Thanks!!

Mike Wilcbon · Answer

You have to choose the best areas to invest in.  Make sure the appreciation outlook is well in your favor and build a network to assist where you are weak. If just starting out and looking for areas in the country, I chose arizona and it is paying off extremely well.

mbkfinancial@gmail.com

Joe Cisneros · Answer

Having a multi-unit property is something that I'm seriously considering.

I have a guy doing some research for me now. My main limiting factor is simply acquiring good, solid knowledge. There are so many resources out there that it's hard to know which are legit and which aren't!

If anyone has solid knowledge and experience with multi-unit property ownership, I would love to speak with them!

Also, you said that you are in a similar situation that I am but only two years out of school. Are you in sales? If so, I'd be happy to help you out with some career advise. When I was younger, a friend helped me out tons and really made sure I had my career planned out. It was the best thing anyone has ever done for me and I'm happy to help others out the same way.

If you are in sales and want to talk, just pm me and I'll give you my number. (That isn't my job and I don't make money that way, I'm just helpful) :)

Dave Kennedy · Answer

Here's my advice. Take it for what its worth because I am basically in the same part of the race you are but make 1/2 as much and have been out of school for 2 yrs.

Why not combined the 2?

Not sure if this is something that interests you but maybe you could find a 2 family. Live in 1/2 and rent the other 1/2 out. It'll give you the ability to own while cutting in on a mortage payment with the other tenant.

Will it cash flow with 1 tenant...no but you have to look at it as though you are owning at a discount.

If that tenant pays 60-70% of the total monthly payments on the property you are doing alright.

Then come 2 years you can revaluate. Did the property appreciate enough to cash out tax free via the government? Can you pull out equity for a down payment for your own single family house then move out and rent both units to make the property cash flow?

Don't just buy a 2 family to buy one. Do your analysis and pretend...."what if senarios".

If I was in your shoes that's where I would go. I personally dont have enough income or saved up to by a 2 family located around Boston. We have the same problem. Limited cash flow, high prices. I'm lucky to find 500 sqft, 1 bed, condo for 250-300k not in the slums.

Which is why I am holding off and waiting for a bit. Seeing  where things shake out.

Joe Cisneros · Answer

Thanks for the replies, they really help.

I'm kind of leaning towards buying in a slightly different area that a friend found that can generate a little bit of positive cashflow. I think getting one or two of those to start off might be the way to go, especially since I don't really NEED more than I live in now, I might as well keep my costs low, I suppose.

It is getting to be a good time to buy though, so I'll keep an eye out for just the right place for me as I get my savings up.

Thanks!

John J. · Answer

I personally still rent my apt in NYC, but I own 2 rental properties.   I am not sure if there is a "correct" route to take but I am happy with my plan and I guess its more of an individual decision.  A primary residence in my area is very expensive and would probably cost me more than renting so for me it made sense.

Account Closed · Answer

First let me address the government letting you keep the profit. First there has to be a profit, you have to buy correctly to see appreciation that really makes a difference in 2 years. The government allows a "waiver" on capital gains from the sale of property if you have used it as your primary residence for 2 of the previous 5 years to the sale.

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Now to respond the original poster. Yes renting in some areas will not cover your expenses. Just sort of how things are. The northside of Chicago is the same way. On rare occasion I find a building that might cashflow, but for the most part, you won't find one. So you have to try different areas. Where homevalues aren't way off the skew.

While I live on the northside, I do not invest on the northside of Chicago. I have found areas that will generate nice positive income for me each month in/around Chicagoland.

I actually have some friends that live in CA that are my private lenders because they realize they can not invest and get positive MONTHLY income in CA. There are other ways to realize profits in those markets, but that isn't what I do, so I can not speak to that.

THe key is that you are learning, you are here and asking questions. That is awesome! Seeing that was your first post. WELCOME!

"Anyone who stops learning is old, whether at 20 or 80. Anyone who keeps learning stays young. The greatest thing in life is to keep your mind young." - Henry Ford

Chris George · Answer

I am glad somebody started this thread.  I live in California in the Central Valley and I am currently renting for $715, its not close to $1000 but I have always been told that it is best to start investing in real estate by buying your own home and then turning around and selling it in 2 years seems how the government lets you put the profit in your pocket.