Advice for buying primary residence?

Question

I am looking for advice on how I should go about obtaining a residence for myself to live in. I currently own one SFR that is being remodeled. Due to size and location of this house, I would prefer to keep it as a rental. My main question here is, are your house buying tactics any different when purchasing a residence for yourself to live in, rather than purchasing for a rental? For example, are you searching for the REO's that need a great deal of work? or are you looking for something that is turnkey? I know that this will vary from person to person. I have been looking at several different properties that would bring me closer to my new job. Some of these properties are cheap REO's that need a complete remodel, while others are not so cheap, but are ready to live in right now. This will be my first actual home purchase. The property mentioned above was purchased from a family member that no longer wanted to deal with a rental, and at a price that couldn't be refused. Any advice is appreciated.

Thanks BiggerPockets!

Jean Bolger · Answer

If your goal is to be a longterm investor you can always consider buying a small multifamily (2-4 units) to live in for a few years. You get the advantage of an owner occupied loan ( much better terms) and you get your housing paid for, or at least subsidized, by the tenants.

I did this for twelve years, now I live in my own SFR. Am I glad to no longer have tenants downstairs? Heck yeah! BUT the benefit to my longterm financial well-being was well worth those years of living next to tenants.

Porter Avise · Answer

Tim Gordon

Thanks for the reply! It's good to hear that from someone who did the rehab on their personal residence. Also, LOVED listening to the podcast you were part of the other day. You gave some great advice.

Bryce Davis · Answer

Use a 403k loan. That way you build equity. I wish I would have done that. But my wife wanted instant gratification.

George C. · Answer

I thought my last primary home of 15 years would be my last, it's been a rental for 5 years now. Always buy with the intention of making money on it if you had to rent or sell it. I've always bought well, doing so with my primary home made the change of it into another rental work. If I had paid a "retail" price, I would've lined someone else's pockets instead of my own. I bought it years ago off the MLS, it was an estate sale property and I paid 60 % of it's value. My neighbor was shocked / irked at how low I bought the house for :) Twenty years later it still warms my heart....

Porter, buy well & cheap, doesn't have to be a fixer or an REO, could just be an estate sale. Even properties priced near retail on the MLS can be low balled if the situation is right.

Elizabeth Colegrove · Answer

My husband is active duty so we move a lot . Our goal is to turn our personals into rentals every time we move. Therefore Every personal property we buy, we buy as if it was immediately a rental we were just going to live in it. We prefer fixer uppers only on the sense of if they have more value in them . In California we have been able to get a nice newer home needing no work as a short sale for a great price.

Mark Gruetzmacher · Answer

@Porter Avise  Like everyone else says it depends on what you want.  I have always bought something that needed work as my primary home.  Been living in a construction zone so to speak every since our first place.  The wife goes along with it and is pretty good about it.  I think someday she just would like to move into something that doesn't need work though.  But in the end she knows that there are advantages to buying and fixing.  Check with your lender and see what hoops you have to jump through to qualify as well.  Good luck.

Jerry W. · Answer

@Porter Avise a big issue is are you married?  Your spouse may have a different idea of whether or not rehabbing your primary residence is a good or bad idea.  If you are single it is not as big of a deal.  I suspect I would not survive moving my wife into a junky rehab house and fix it up while living in it.  Yours may be different.

Most folks pay more for their primary residence than they will for a rental, and fix it up nicer.  Also primary residences are often better as an eventual flip house than as a rental due to the tax exemption of selling your primary home for 2 out of the last 5 years being tax free unless you exceed a certain price or income.

Whatever you decide good luck.

Tim G. · Answer

@Porter Avise thank you! Glad it could be some assistance to you!

Porter Avise · Answer

Thank you, @JOAN DICKIE

I will be financing so I plan to talk to my loan officer soon. The finance that I have on the other house is very small in comparison to the value of the house. Also, whatever house I do buy now, I would plan for it to be a rental in the future. I will keep searching until I find the right deal. First, I guess I need to speak more with my lender to see a closer estimate of what my budget is.

Advice for buying primary residence?

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