Should you own a primary residence before investing?

Question

I’m 25 years old and I’m gaining ground in my real estate investing education. I’ve read several books, listen to numerous podcasts in BP and have read several articles on the forums. I’m looking for advice in the fact that I don’t currently own my own primary residence. I currently rent and am wondering what the opinion is on starting to invest in real estate before owning a primary residence.

Long story short, I’m torn between purchasing a primary residence for myself or use that same money to start to invest.

Thanks you!

Long story short, I’m torn between purchasing a primary residence for myself or use that same money to start to invest.

Thanks you!

Damian Bialonczyk · Answer

@Nicholas Hoffman

I purchased my first property (a duplex), lived in it for 2 years, then moved closer to Boston and started renting again while continuing to own the duplex/invest in areas where real estate is more affordable. For me it boiled down to free cash flow from my W2. Owning a primary residence where I currently live would require a sizeable downpayment and ties up more cash per month in mortgage/tax/expenses than renting. I put the monthly savings towards future investments.

Chris Bernard · Answer

I went through this same dilemma recently! For me, I looked at the numbers on owning vs renting. I ended up buying a 3 bedroom SFH and renting out 2 of the rooms to some friends. This option actually ended up cash flowing better than renting and I am also gaining equity in the property. I would look at how much cheaper renting is, and if you think that you could make more use of that extra cash flow each month to make it worth not gaining equity on your primary residence. Also you should be thinking about how much you have for a downpayment. If it is your primary residence you can usually get into it for 3.5% using an FHA loan, but if it an investment property it will be 20%+.

Dan Schwartz · Answer

@Nicholas Hoffman

Your housing cost will affect your financing.  If you can rent for less than owning, rent.  If you can own for less than renting, own.

Tyler Lucas · Answer

@Nicholas Hoffman

Thank you for starting this thread, I am interested in the same question.

Nick Gann · Answer

@Nicholas Hoffman

In my opinion yes and no. I went the route of owning my own, first. But that was more by necessity than choice.

Owning your own, you can learn some valuable things such as work involved to maintain, things about banks and values, what goes into ownership, etc. You also can gain some equity in it that you may use later for acquisition. But you pay for that luxury yourself.

In my own case I wish I had been in a situation to own a rental first. Because you can the above experience but have someone else paying for it.

Jon Moore · Answer

@Nicholas Hoffman if you're excited about the idea of living in a home that you own then do it!  Otherwise I would advise against it.  For what it's worth, I started out at age 22, the house was kind of dumpy so I did some initial, minimal cosmetic fixes and got a couple of roommates while I lived in the basement, which was not finished and served as a pretty powerful motivator to get it finished in my spare time.  I also had the energy back then to work, work, work.  And I was excited about it.

Bottom line is that if you find the right deal, and you want to do it, then go for it.

Also one more tidbit from rich dad is to buy investments that you love so you'll take care of them.  This has certainly been the case for me.

Kevin Silva · Answer

@Nicholas Hoffman personally if it were me and I could have a Do over I would continue renting and focus on acquiring assets. As many as possible and as quickly as possible

Theresa Harris · Answer

@Nicholas Hoffman It very much depends on where you live, the cost of housing and your plans.  If you are going to be moving in the next few years, better to rent than buy a house...unless you will keep it as a rental.  In some areas the cost of buying a house is high compared to rent, so it would make more sense to buy a rental in a less expensive area.

If you plan on staying in one area for a while, why not look at a duplex?  You can live in one half and rent the other.  Because you are living there, you should be able to buy it with a lower down payment than a normal rental (e.g. 5% vs 20%).

Matt Millard · Answer

@Chris Bernard

No especially if you live in Dallas or other big overpriced city.

Unless you can combine the two into a house hack project.

Should you own a primary residence before investing?

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