Rent vs buy personal residence

[Andrew Oatman]

My wife and I will close on the sale of our personal residence in a couple weeks. We're considering pros/cons of buying another SFR vs. renting. The SFR would tie up a lot of capital that we could otherwise use to invest in multifamily real estate. I'd like the BP community's thoughts on which scenario is the better investment:

1. Buy a $450k SFR. $22k downpayment; $10k closing costs; $50k rehab budget, ARV of $550. $40k/year in mortgage payments (including principal pay-down, interest, taxes & insurance). Make this our personal residence for 2 years to take advantage of the no-capital-gains-tax benefit. Expected sales price after 2 years is $600k. OR
2. Rent an apartment for $15k/year. Save $82k in capital from not buying & renovating an SFR. Invest that $82k+ in an 8-12 unit multifamily property that cash flows $1,000/month (after applying 50% rule). Use Year 1 & 2's total living expense savings of $50k (renting at $15k vs. mortgage at $40k) and either buy SFR in Year 3 or continue renting & invest in multifamily real estate.