House hack or, rent and invest?

Question

This is something I can’t seem to wrap my mind around, maybe someone with more experience can share some of their knowledge with me.

Say I have $60,000 saved in the bank and I want to buy my first property. My long term goal is to acquire a small portfolio of rental properties over the next 10 years. My short term goal is to purchase a property that gets my foot in the door of real estate, while also providing me a place to live.

That being said...

Do I buy a residential property with and FHA loan and house hack it?

Or.....

Do I put 20% down on a cash flowing rental property and go rent an affordable apartment elsewhere?

Dan Schweit · Answer

"My short term goal is to purchase a property that gets my foot in the door of real estate, while also providing me a place to live"

Sounds like ^this is your goal, right? Is buying a cash flowing rental, but renting an apartment accomplishing the goal. If you can buy a house, and rent one room, or possibly more than one room, that's what you should do. We all hear so much about house hacking these days, but that's because it works. I think once you pencil out the numbers on both of these options it will be 100% obvious the direction you should go.

Cole Britting · Answer

I personally think house hacking is the way to go, and that is what I plan on doing once I am out of college.

The numbers may not be as favorable with PMI, but you get the same experience with much less cash needed out of pocket and can cut down on your housing expenses. Also, it can be easier to do some hands on work when you are living in the property (like repairs, rehab, managing tenants). Even if these are things you may want to outsource in the future, I think getting the experience of doing them is pretty valuable.

In the end, you can always turn it into a normal rental property if you choose to move out.

Hope this helps and best of luck!

Rick Pozos · Answer

Hey @Vincent Ludegna maybe buy something that needs some work. Not a whole bunch, but paint, yard work, flooring or that kinda of stuff. Something that you can still get an FHA loan, but something that maybe has been on the market for 100+ days that you can get a good deal on.

Do some work yourself or hire some contractors. But see if you like being the general contractor on a small scale. If you do, after a couple of years, you can keep that house, turn it into a rental and get another FHA loan on the same type of house. By then, you will know if you like being a landlord and ready to do it some more. Keep looking all the time to be ready for the DEAL that comes up.