Buying your own home while building your rental portfolio

[Laurie Williamson]

I am a new investor -- just bought my first single-family rental about six months ago. I would like to transition to multi-family as soon as I can save up enough capital. However, I just had a baby in September, and now that my husband and I have two small kids, we would like to move to a newer, larger home within the next 2-3 years. This has put my investment goals on hold, because I want to make sure that we are easily approved for a loan to buy the home we want together, before I buy my next rental. My question is, what is the best way to invest (or save) my money in the meantime?

I would love some advice from the BP community. I apologize for this question being kind of long. I could not figure out how to say it much faster. I would greatly appreciate any advice you could give, and THANK YOU in advance if you take the time to read this!

A little background: We own our home now; just paid it off. We would like to sell our house, and use the money as the down payment on our new home, probably taking out a loan for 300k. I bought the rental in my name only, and put 25% down. I owe about 90k on that loan. I am self-employed, and am able to save up some money through my bonuses each quarter. How much I can save varies each year, but it is possible that I might be able to save 20-30k/year if I work very hard and am frugal. I am considering the following options:

(a) Use the next 3 years to pay off my rental property. Then, after we buy our own home, sell the rental and use the money as a down payment on a small multi-family. (b) Keep the rental, which is earning about $300/month in cash flow. Put my bonuses into a savings account, and after 3 years, buy our new home, and use my savings as a down payment on a multi-family, but KEEP the single-family rental. (c) Keep the rental, and purchase 1-2 more SFH in the meantime… if I can get approved for a loan. <- but, if I do this, will it make it hard for us to buy a house for ourselves?

We both work full-time, but since I am self-employed, it was a little challenging for me to get the loan for the rental using traditional financing. My husband is supportive of my real estate goals, but he is not investing with me at this time. I'm doing it all through my own funds. One more thing to mention is that the reason I got interested in real estate is because I wanted to increase my income so that we could buy a larger, better house. While I do care about saving for retirement, it is really important to me personally to be happy and enjoy life right now — so I’m not interested in buying a fixer-upper or living in ¼ of a quad.

So, what makes the most sense – a, b, or c? Or is there a “d” option I have not considered? Thanks again for your advice and patience reading my long question. Love BP!!