Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Starting Out
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 8 years ago on . Most recent reply

User Stats

14
Posts
5
Votes
Colin Simpson
  • Lafayette, LA
5
Votes |
14
Posts

Buy and Rent vs. Rent and Buy

Colin Simpson
  • Lafayette, LA
Posted

Hello BP,

I am looking to get my feet wet in real estate investing after I just recently graduated college and started working a 9-5 in Little Rock, AR.  I want to get started, I'm just at a fork in the road on how to do it.  I think that I have a few options and hope to hear advice and/or stories as to how people may have started in the past.  I don't know how long I plan to stay in this area so I am wondering whether or not to factor that into my decision.

Option 1: Buy a house or multi-family to live in and rent it out if I leave the area in the near future. I know that because I would be living in it I would spend more to find houses in the area I wanted to live in and I have not found many SFR in those areas that offer much cash flow by my calculations.

Option 2:  Buy an investment property and rent for my primary residence for the time being.  I think this might allow me to pursue a better deal since I would not be as worried about the location.  This option intrigues because I have heard a few people on the podcasts say that they have rented to buy I just feel like the other one is probably the safer bet. 

I look forward to hearing your opinions!

Most Popular Reply

User Stats

101
Posts
46
Votes
Nick Ferguson
  • Investor
  • Parma, OH
46
Votes |
101
Posts
Nick Ferguson
  • Investor
  • Parma, OH
Replied

@Colin Simpson .  I kind of faced this dilemma myself a few years ago.  While I was interested in real estate, I wasn't "positive" I wanted to do it just yet.  I had just graduated, was living with my parents, and driving over an hour to work each day so I decided I would move closer to my job. 

I was going to rent but when I saw how much rent was in the area (600-800 for a 1 bed apartment, 800-1000 for a 3/2 not-so-nice house) and how cheap houses were to purchase (30-70k for a not-so-nice to moderately nice 3/2 house) I decided to just buy.  Also, waiting lists for apartments were like 6 months despite them being over-priced compared to what a mortgage would be.  

Here is where I had an opportunity, and you may as well. Because I was a first-time buyer, I was eligible for the FHA 203k rehab loan (which to my knowledge, there is really nothing exactly like it available to investors). I was able to find a 4 bedroom, 2 bath, 1700 sq. ft. house that is gorgeous and has a 2 car garage and is about 1 mile from the local college. The house was a HUD house and was vacant. All of the copper had been stripped and a couple walls torn up. Long story short, because the 203k loan rolls rehab costs into the mortgage, I was able to get out the door with a 52k loan (about 25k purchase and 25k rehab) and the house appraised for 76k when all said and done.

I immediately moved into the house and just put the word out through friends that I was looking for roommates. I ended up getting 3 roommates and collecting $900/month in rent while only paying $575/month mortgage plus utilities. So I basically lived for free. And since with FHA, you only have to put down 3.5%, after closing costs and down payment, my initial investment was around $5k I think. I lived there for 2 years and now I've moved and I still have a $575/month mortgage but I have 5 people in there (one of the non-bedrooms I put a stand-alone closet in and call it a 5th bedroom) paying $1150 per month. It doesn't quite meet the 50% rule but I'm paying it off in 15 years instead of 30 and I could always re-fi or get a HELOC to get some of my cash out if a major expense like a roof or something popped up.

Sorry for the long post and all the round/estimated numbers but I was so young and didn't have a clue what I was doing so I don't have them saved anywhere readily accessible. I did nothing right from an investing business perspective on this one but I bought it for such a good price that it still works despite me not knowing what I was doing 5 years ago. Depending on the market where you are, and whether you can find a great deal on a HUD/203k, that may be an option that is available to you (like it was me) that isn't available to most investors.

Loading replies...