First Home, First Rental, or both?

First Home, First Rental, or both?

Madison, WI · Member since 2016 · 4 posts · 1 vote

So basically I am wondering what the best strategy is for the order of my purchases and also looking for some insight on general investment topics.  I currently own no real estate and am looking to purchase with my fiancee in the coming months.  I have always wanted to own investment property and am leaning toward the rental side.  

First question: Does it make sense to purchase my own personal home first, and then begin purchasing investment properties, or should the rental properties come first and get my own home after that?  Or should I purchase my own home with the thought of renting it down the line?

Second question: We are currently looking at some duplexes (as in buying both units) in our area, but are not against buying a home, living there, and then renting it out/selling in like 3-5 years.  My question is, what is the best strategy here? Duplex, Single family, other?  The duplex seems to be the better option for future cash flow and fits our budget better than a bigger multi-family, but right now we are personally leaning toward a modest single family home.  Also, in regards to the duplex situation, I believe if tenants are currently living there with a signed lease, we would need that lease to expire if we would want to move in to one side of the of the duplex.  That could cause problems for us as we would need a place at or before our current apartment lease runs out.  We could look into a month-by-month lease option but we don't think our current complex would allow us to do that.

Third question:  My brother wants to be included in the deal if we purchase the duplex units or a multi-family property, and even though I trust him, my fiancee isn't 100% on board.  She has always been told not to mix family and business, but my family has grown up doing business together, and my brother and I have spoken about starting an investment business of our own someday.  So my question would be, is this a bad or a good idea?  Is it situation dependent? He is more handy than I am and could help with fixes and maintenance, but he is a "dreamer" type which sometimes leads to him getting in over his head with certain things.  I am the analytical one that thinks things out before acting and he is the one that will act and think of the consequences later.  I wonder if our styles would clash or if they would mellow each other out and make for a good fit as partners?  The biggest issue here is that my fiancee currently makes more money than I do and would be bringing in the larger portion of the down payment on any place we would be buying.  

Thanks for reading.  Any and all advice is much appreciated.

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JD MartinBusiness Member
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Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
10y

1. Don't buy anything with your fiance unless you first get married or hammer out a good, legal, written asset clause that will discuss things like maintenance costs, exit strategies, etc. As soon as you do, you will break up and be in a world of hurt figuring this stuff out.

2. Financially, the best thing to do is buy a rental house and live in your van for free. How much of a variation you want on that is up to you. A primary home is first and foremost a place to live. It can become an investment, or it can be an albatross. If you can buy a house that provides $1000 cash flow as a rental, and rent a house for yourself for $500, you're making $500 clear on something you need anyway. That's a great deal. Play with the numbers to see what you should do. It's one reason a lot of people do like getting duplexes at the beginning, because you get a place to live and a rental property.

3. Same deal with your brother. In my opinion, not a good idea, but if you are going to do it make sure you have a good written contract governing everything. 

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  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
    10y

    1. Don't buy anything with your fiance unless you first get married or hammer out a good, legal, written asset clause that will discuss things like maintenance costs, exit strategies, etc. As soon as you do, you will break up and be in a world of hurt figuring this stuff out.

    2. Financially, the best thing to do is buy a rental house and live in your van for free. How much of a variation you want on that is up to you. A primary home is first and foremost a place to live. It can become an investment, or it can be an albatross. If you can buy a house that provides $1000 cash flow as a rental, and rent a house for yourself for $500, you're making $500 clear on something you need anyway. That's a great deal. Play with the numbers to see what you should do. It's one reason a lot of people do like getting duplexes at the beginning, because you get a place to live and a rental property.

    3. Same deal with your brother. In my opinion, not a good idea, but if you are going to do it make sure you have a good written contract governing everything. 

    Skyline Properties
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  • Joseph CatalanoPro Member
    Rental Property Investor · Lewiston, NY · Member since 2014 · 192 posts · 97 votes
    10y

    I agree with @JD Martin do not buy anything with your fiancee unless you are married or you are going to have an LLC or Corp.

    Secondly, never, never, never go into business with family unless you have an LLC or Corp worked out.

    Next, my advice would be to Househack.  Buy a Duplex or Triplex, live in one and rent out others.  It is not a bad starter home and it is a great way to start your investment portfolio, I wish I had done it years ago.  Once, you decide to move to a larger home because of kids or for another reason, you just pick up, move out and rent out.

  • Madison, WI · Member since 2016 · 4 posts · 1 vote
    10y

    Thanks for the advice, Jd.

    1.  I do believe I am secure in buying with my fiancee because we have been together for 8+ years and neither of us are the kind of people that would go after the other, should, god forbid, anything happen.  We will look into what needs to be done legally though, just so everything is set up should anything happen.

    2. I understand where you are coming from on this point and will keep this is mind.  We were just looking to upgrade to something that is ours, with a little more freedom, rather than renting and paying someone else, while building no equity.

    3.  This is what I assumed the reaction would be, but thanks for the input!

  • Madison, WI · Member since 2016 · 4 posts · 1 vote
    10y

    Thanks for the advice, Joseph.  

    I am liking the idea of househacking the more I hear about it.  Seems like it would be fairly affordable, we would have cash flow from other units to put toward mortgage payments, and like you mentioned, relatively easy to move out when we need to move on.

  • JD MartinBusiness Member
    Moderator
    Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 17k+ votes
    10y
    Originally posted by @Jordan Roberts:

    Thanks for the advice, Jd.

    2. I understand where you are coming from on this point and will keep this is mind.  We were just looking to upgrade to something that is ours, with a little more freedom, rather than renting and paying someone else, while building no equity.

    3.  This is what I assumed the reaction would be, but thanks for the input!

    Renting can be a great way to build equity, so long as what you are renting provides enough leftover income to put into an investment. Let's say you can afford to spend $1000/month on all options ( home, investment, etc). Let's say someone gave you a dilapidated mobile home for free and you found a park that would let you rent a space for $200/month. That leaves you $800/month to buy an investment property. Maybe that $800/month lets you gather enough cash so that you can buy an investment property that rents for $1500/month. After expenses, maybe you have $400/month cash flow. Subtracting the $200/month from the trailer park, you are now pocketing $200/month beyond the $1000 you had to spend. So you really now have $1200/month. 

    Or let's say you don't like the idea of a trailer park so you buy yourself a nice little house with a $700 mortgage payment and $300 monthly insurance & property tax bill. So now you have $0 per month and have to either try to rent out a room in your house, or hope that your house builds some major equity very quickly. 

    If the sole objective is the accumulation of capital, keep your living expenses as close to $0 as possible and try to have every dollar earned bring in additional dollars. Now most people don't like living in a van or a run-down trailer park, so you have to adjust accordingly, but don't automatically assume that because you are renting you are missing out on the chance to build wealth. 

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  • Title Representative · Dallas, TX · Member since 2016 · 57 posts · 5 votes
    10y

    I saw the bigger place would like have, but how first home , rental , of all stated could be my "Business" love it work on REI job be the one or #1.

  • Title Representative · Dallas, TX · Member since 2016 · 57 posts · 5 votes
    10y

    rental or living :

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