Did you rent or own while building your portfolio?

Question

I've read quite a few of the "standard" books about real estate investing talked about on BP but have yet to really see how and where investors live while building their portfolios. I'm planning on holding my first home purchase as a STR but am really struggling to figure out whether it makes sense to try and buy something else right away or rent for awhile to build capital. I'm planning to use a HELOC to finance the purchase of my next property in some way depending on the market.

Seems counterintuitive to be setting my sights on purchasing a new property for other people to rent from me while living in a rental myself. Of course I realize househacking is the perfect solution but just curious about how others have dealt with the initial stages of living while building up a portfolio. I'm especially interested in hearing from those of you who live in expensive markets. I'm in Denver.

David Pere · Answer

@Kyle Larson I have done both while building my portfolio. Treat your primary residence as an investment. If you would buy it as an investment, buy...if not, rent!

Ali Boone · Answer

You bet! Well and with most of us growing up thinking owning your own home is a good investment, it can feel weird to not be investing in a 'good' investment if we're...investors. But the perceptions are off-base.

Ryan Evans · Answer

I’ve never had an issue renting because I can be flexible and invest with a bigger amount.

My last landlord said I was his best tenant ever because landlords make the best tenants!

Michael Henry · Answer

@Kyle Larson i started out owning, but quickly realized a can save a lot more by living in an owner occupied duplex. Sold my primary residences and been living in one side of a small duplex ever since.

Joaquin V. · Answer

@Kyle Larson live as cheap as you possibly can! As many people are mentioning it really comes down to your plan, where you see yourself/family and sacrifices you're willing to make. My wife and I purchased our home way before we even thought about investing in real estate, however, focused on affordability. That was 10 years ago during the recession, we've since used that equity to purchase MFs out of state. With rent being so high in Denver(we live here to), it makes sense for us to rent our home out and renting ourselves(wait for it). This is only because my brother in law basically has a mother in law suite at his house that he will rent out to us for cheap. Essentially, making this move will let us live for free as our home's rent will cover all necessary expenses and our new rent amount. While we're sacrificing space(downsizing) and comfort-ability, we know this move will help accelerate our goals as we'll be able to focus our savings to other properties.

Samuel Pentowski · Answer

I'm interested in house hacking and I have a 4plex in San Antonio in mind so I'm going after it.  The numbers don't allow me to be profitable having that as a rental property but my family living in it allows us to live basically free, only a mere 200 required for taxes a month.  I figure if I live there for 3-5 years and rent continues to rise 3% this unit will become a cash machine when including debt pay-down and rise in rents once I move elsewhere.  I figure there is no need to continually move while house hacking and living in this unit (if I'm able to acquire it) will allow me to free up considerable amounts of my w2 income for investing elsewhere.  This is great for me, and if I can achieve this valuable first deal I figure more will be coming soon.

John Teachout · Answer

We own our home and I don't see that ever changing. It may, but it wouldn't be voluntary.

Derrick E. · Answer

I rented for the first little bit as I was outside the city and had an awesome deal on my rent. It honestly didn't make sense to buy, especially having that mortgage payment in my DTI.

I now own the home I live in and have been considering it a live in flip.

Kyle Larson · Answer

@Ali Boone thanks for the great advice. I do think there is a strange feeling around renting when you own other properties but especially in an expensive market the numbers to rent vs own just make more senses sometime. Thanks for the perspective.

@David Pere that advice really hits home. Good to make it straightforward and logical rather than emotional in any way.

Did you rent or own while building your portfolio?

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