Buying a home every 2 years, renting the previous home out, and repeating, good idea?

[Daniel Ben-Hur]

My and my soon to be wife both graduated college at the same time and we make a combined $150k/year ($75k each) We are still living at home with our parents to save money, and we want to build wealth in real estate. 

We both have 0 debt. I’ve seen many strategies, but this one that has caught my eye recently. Purchasing the right home every 2 years, then renting it out to someone and purchasing a new home. Repeat for 15ish years to hopefully own a total of 6-7 homes by the end of this. I am projected to make $100k and she is projected to make $150k within the next 5 years, and on from there. Is this doable on our salaries in Bakersfield, or would it be better out of state? 

[Chris Clothier]

Quote from @Daniel Ben-Hur:

My and my soon to be wife both graduated college at the same time and we make a combined $150k/year ($75k each) We are still living at home with our parents to save money, and we want to build wealth in real estate. 

We both have 0 debt. I’ve seen many strategies, but this one that has caught my eye recently. Purchasing the right home every 2 years, then renting it out to someone and purchasing a new home. Repeat for 15ish years to hopefully own a total of 6-7 homes by the end of this. I am projected to make $100k and she is projected to make $150k within the next 5 years, and on from there. Is this doable on our salaries in Bakersfield, or would it be better out of state? 

 Congratulations on being debt free and for being smart enough to be patient!  Really good job of preparing to be able to make some financials moves to enable independence.

My comments are slightly different from everyone else.  #1 - love that you have a plan.  That is the biggest mistake I see with many investors.  They fail to think more than one to two steps ahead.  So, congrats for thinking long-term and more than just the next step to take.

On the surface, purchasing, fixing, living in a property and then renting it out to do all over again sounds like a good strategy.  I would just caution you that as you grow as a family and as you grow in your earnings and even get past that first couple of homes and start building wealth and income as a real estate investor, your appetite for continuing to move every couple of years will likely diminish.

I turn 52 this year and in looking back I have lived in over 20 houses.  I've moved so many times and the older I get, as my family has grown, stability is more and more important.  Even in your early 30's, you may not want to be continuing to move every couple of years.  

As a step one, I love it and you should absolutely be prepared to make adjustments and possibly even purchase passive investments as you can as you go along.  I guess my advice in the end is be accepting on the front end that your plan may not be written in stone.  Be open to the possibility that your may very well change and that could be a good thing.  

You have done a great job of getting yourself prepared - Best of luck as you get started! 

[Lane Kawaoka]

That's how I started as a civil engineer. Bought a house to househack then out of state turnkeys. Then once became accredited stopped buying little rentals. It just takes a while.

[Carlos Valencia]

Hello Daniel,

Congratulations on your graduation. Now time to enter the workforce right? 

This is a good strategy to buy a home every two years and rented it out. If your jobs are in Bakersfield and not remote I would suggest to begin investing locally to gain the experience. One thing you can do is house hack which means you buy a single family home or 2-4 units and live in one unit and rent the other units. If you end up just buying a single family home then you rent out the other rooms. 

The great thing about renting out your other units or rooms is that you also get to have a place to live at a lower cost that is actually yours and you will also gain experience on how to manage tenants and what to look for when they apply. 

If your current market allows you to actually qualify for something with only using one of your incomes even better because if you and your wife can each buy a property every two years you will speed up your process. Not only that but you each can qualify for a max of 10 conventional loans under your name. If you both go into one property then both of you will now only have available 9 conventional loans. What this means is that you can essentially buy 20 properties using conventional loans and not investment loans in the future. 

Last thing I would suggest is when looking for your first investment that you dont  max out on your borrowing power. What does this mean? it means that if you max out your debt to ratio income on your first property then when planning for your next property will be more challenging as you will basically need to make sure when you leave your current property that your rental income will cover all of that properties monthly mortgage, tax and insurance. 

Once you are ready to begin on this journey its best to speak with a mortgage lender to start the mortgage planning and talk about all the different ways you can begin your investing approach and reach your goals.  

@Albert Bui @Matthew Kwan

[Carlos Ptriawan]

This is my track record so far , in term of DSCR for each property:

a) ex primary property A, DSCR 1.1x , purchase 350k, FMV 1.1M
b) ex primary property B duplex, DSCR 1.8x, decided to sell after BRRR
c) ex primary property C condo, DSCR 0.9x , decided to sell when appreciation > 500k
d) current property, ADU/basement, DSCR 1.1x purchase 800k, FMV 1.2M rehab 70k

I do have others too that I purchased solely for rental, but yea in the last 12 years I've been collecting and selling primary few times.

I am now understand there's product called no-ratio loan for primary mortgage, with this product this can be used if conventional can't be used.

Again if you focus on your W2 and focus collecting primary you would forget to buy rental/OOS because appreciation every year is even greater than rental.

Some hints: average appreciation is 4-6% depending on year ; but the beauty of this strategy is actually you live in the same primary house, your mortgage is 100% paid by your tenants and your tenant never meet you because we live in different building structure.

[Albert Bui]

Quote from @Daniel Ben-Hur:

My and my soon to be wife both graduated college at the same time and we make a combined $150k/year ($75k each) We are still living at home with our parents to save money, and we want to build wealth in real estate. 

We both have 0 debt. I’ve seen many strategies, but this one that has caught my eye recently. Purchasing the right home every 2 years, then renting it out to someone and purchasing a new home. Repeat for 15ish years to hopefully own a total of 6-7 homes by the end of this. I am projected to make $100k and she is projected to make $150k within the next 5 years, and on from there. Is this doable on our salaries in Bakersfield, or would it be better out of state? 

 Every 2 years works of course, but perhaps You speed it up and do one every 6-12 months before you get serious or develop a family at which time it will be much tougher to keep moving so often. 

Most guidelines state minimum 1 year but in practice when these applications come in I've seen that 6-12 months with a reasonable explanation can be done easily.

Now some times in rare instances with exception I've seen buyers get approved even under 6 months. Some of these exceptions have been unsafe environment (article from borrower with shooting nearby, larger family size and need for more space from unexpected pregnancy, job relocation, and other.

So every 2 years is fine however dont let that 2 year figure hold you up because there is general guidelines then there is whats "really," happening out there with loan underwriters and what they'll actually approve.

@Matthew Kwan

@Carlos Valencia

[Anderson S.]

Quote from @Carlos Ptriawan:

so the way you do it is : buy/rehab primary-->rent it out -->collect lease -->HELOC it---->apply primary with showing the lease so DTI reduced-->continue or sell after 2 years , you can mix/match between the two, basically for every primary, your job is to make sure you have Dscr>1.0 and keep moving.

How is this working out for you? Just curious - Seems like you have a sound strategy - did you begin in a low cost of living area to start?

[Carlos Ptriawan]

Quote from @Anderson S.:

Quote from @Carlos Ptriawan:

so the way you do it is : buy/rehab primary-->rent it out -->collect lease -->HELOC it---->apply primary with showing the lease so DTI reduced-->continue or sell after 2 years , you can mix/match between the two, basically for every primary, your job is to make sure you have Dscr>1.0 and keep moving.

How is this working out for you? Just curious - Seems like you have a sound strategy - did you begin in a low cost of living area to start?

 started at 2009 , i am now at the point where dti is being maximalized in all fronts as home price keeps rising.