Investing - Starting with Primary Residence purchase - thoughts?

[Sean Tatarian]

Long time BP follower, first post!  Finally getting started with the process of my first investment.

Background:

-Near $100K saved up
-Have a great full time job I will keep
-Plan is to own multiple rental properties in next 2-5 years.

My plan so far:

For career/family reasons - my plan is to first buy a SFR that will be our primary residence. Much of our career work requires a big backyard that we can customize to our needs, and thus why starting with the primary residence seems to make more sense than a multi-unit house hack strategy (where we wouldn't necessarily want to build our dream yard since we wouldn't stay more than a year).

Wife and I are considering adding a 1br/1ba structure to the yard to use as an Airbnb - to take away some of the mortgage payment burden.

For this first purchase, I want to use FHA or similar low money down financing for the SFR so I can save the majority of my cash position for a future multi-family residence purchase (within the next 12-24 months ideally). I would rent out the multi-family to start generating some passive income. Thinking it might make sense to re-fi the SFR to do that, or potentially have enough cash available for a traditional down payment on the 2nd purchase.

My question is: am I missing any potential red flags or considerations in this scenario?  It makes sense in my head.  But I know people start with the house hack first, and then leverage that to buy their primary residence.  So I'm doing it a bit backwards.  But I think I have the cash to do so.

Any and all insight is appreciated!

[Matt K.]

woops misread the first post.... 

[Ken Dillard]

You sound well positioned and a set strategy.  The only thing that jumps to mind I did not see you mention is any zoning considerations.  Double check multiple structures are OK or minimum lot sizes and anything else hidden in the section of the zoning law for your property's area.

Good Luck!

[Chris Mason]

Hi @Sean Tatarian,

That plan makes sense. What many folks don't really talk about is that most REI are successful in their other endeavors as well, so if the backyard is tied to your business success, get the back yard.

I wouldn't necessarily rule out MFRs. You're the landlord, you don't have to share the yard if you don't want to.

[Account Closed]

I like where your head is at, and I myself had/have a similar plan for myself. I used an FHA loan to buy my first house which I was going to use as my primary residence. This allowed me to put 3.5% down, but FHA requires you to owner occupy the property for at least a year before moving. I've been anxiously awaiting my year mark so that I can purchase my next property ideally multi family. Here's the problem have you ever tried to move from a nice SFR to a duplex? It's a tough move. Conventional loans can qualify for HomeReady which is a program that will allow you to put 3% down, but you can owner occupy con. For 5% as well. The best thing about this is, there is no set amount of time you have to be using that home as your primary residence unlike the FHA loan. Also when you get 20% equity in your property, you will not pay PMI with conventional loans (FHA is for the life of the loan.)

Regardless of what you do, you are ahead of the game with the liquid cash that you have. If you are putting 3-5% down that cash is going to last for a bit and help you Reach your goal.

[Sean Tatarian]

Thank you guys for the insightful replies.  Great call on the zoning requirements, hadn't yet thought to look into that.  

Overall makes me feel more confident this plan could work!  Go BP!

[Kevin Phu]

Sounds like you have a solid plan! Of course there are other things to consider which others have already mentioned. I am looking for an SFR to house hack ad my first property as well. My reason is that it works out better for me financially and risk tolerance wise for now. If you don't mind me asking, what do you do for work? Curious what you do that requires a large yard that you can customize. My imagination is avoiding me.

[Sean Tatarian]

Originally posted by @Kevin Phu:

If you don't mind me asking, what do you do for work? Curious what you do that requires a large yard that you can customize. My imagination is avoiding me.

@kevin Phu : Gardening type business. Where if grow our own plants etc... that become our inventory to rent out and sell (vs. buying them wholesale). So we want to invest a lot of time and some money building raised beds and customizing it to our needs. Sure we could accomplish that in a MFR, but then we'd want to stay there much longer than a year and that goes against our long term REI strategy.