Should I Buy a Bigger House?

Question

I live in the Portland (Oregon) suburb of Happy Valley. It's a beautiful location with home prices ranging from $350k and up. I'm going to buy a home for me and my two daughters to live in and I'm trying to decide if I should buy a smaller home or a larger home.

If I buy a 3 bedroom home, it would be more affordable at $424k, however, all three bedrooms would get used up (one for me and one for each of my daughters). If I buy a larger home, 4 or 5 bedroom, it would cost more $474k or $484k, but I could rent out one of the extra rooms as either a longer term rental (friend, family member, or craigslist) or as a short term rental (AirBnB/etc.). Doing so would help offset the higher cost of the larger home.

My questions are:

• - I would prefer the short term rental option, but I'm wondering if the area I'm in has enough draw that I would actually get people renting the room?
• - How would I best go about determining if people would rent a room in my area?
• - I'm thinking of calling folks who have AirBnB in the same area to start out with, but are there any other ways of determining this?

I would appreciate any knowledge, insight, and wisdom people would have with regards to my situation.

Thank you!

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Mathew Wray · Answer

I’d also be asking questions (and maybe it’s obvious and you’ve already done it) around safety. How old are your daughters and are you comfortable sharing that compact a space with a tenant and your family?

Rather than look for a place in HV where you can rent rooms, can you look for a true duplex/ADU situation so you still get the rental income but with less of the shared space risk? You may pay a little more but you may find a more traditional rental is worth the higher price point.

William Walker · Answer

I wouldn’t feel comfortable renting a room out to strangers, especially with 2 daughters. Buy the house size you need and save the extra to buy a rental property.

Joel B. · Answer

Howdy,

I thought I would post an update to this to let ya'll know what happened. I ended up purchasing a bigger house (4 bedrooms AND an office) that cost a little more ($467k) but was still a deal for the area. I have 4 bedrooms, 2.5 bathrooms, an office downstairs, and a 3-car garage. I mostly work from home now, so I'm home all day. I get to drop off and pick up one of my daughters from school every day and the other daughter stays home to do homeschool (she mostly schools herself). My girls are 12 and 13 and are very self-sufficient.

Six months ago I decided to Airbnb one of my extra rooms and it has been a WONDERFUL experience. I love hosting in my house and I love being able to work this business with my daughters. I get to teach them how to run this business and we generate enough income that I don't need to work a second job anymore.

I use the third bay in my garage for my wood shop. I have been building a lot of built-in cabinets for my house so that I have storage for stuff and I also don't have to purchase individual pieces of furniture. When I go to sell my house in the future, it will sell faster and for more money with all my built-ins. I will also have a lot less furniture to move since it will be built-in.

My house went up in value over $100k in the first year and is still going up. This area is going crazy with house prices. I already refinanced my initial FHA mortgage so I could dump the PMI. I'm now getting a HELOC so I can use the equity to buy my first short-term rental (STR) in Orlando. I used to live in Florida and will move back there (Orlando) when my daughters graduate from high school in six years.

Life is good and I'm so happy I bought a bigger house and started Airbnb.

Thank you all that posted with your thoughts and suggestions. I really appreciate all the feedback and comments.

Michael Ohara · Answer

Check airbnb and craigslist for rental ads in your area. That should give an idea for demand and price point.  Or call a realtor/property manager and ask about the rental market in your area.

Kerry Baird · Answer

What a great situation for you and your kids!

Steve Milford · Answer

@Adam Zagorsky I just go to craigslist and look for similar in area.

Adam Zagorsky · Answer

I have been using Rentometer.com for evaluating rent values when looking at properties in different areas. This doesn't give information on a rent per room basis but could be good perspective on it. Does anyone have any experience or thoughts on the accuracy of using rentometer.com? i.e. Their estimates matching up well with reality

Steve Milford · Answer

Similar to what other people have brought up, I know too many people that want a tenant and think that more income is great until they have that renter for a few months. Then I often hear about the lack of privacy, lack of mutual respect of things and space, differences in expectations, differences in how utility bills are paid etc, and all the nuances that come with the tenant-landlord regs and laws. Have you read those for your area? Finding a renter is easy, worst case just lower the price, finding a good-respectable renter is hard and requires screening, conversations with people, and a little nosiness on your part. Remember having a renter is a business, and you just can't "kick them out" when and if you grow tired of them.

My recommendation is to buy what you can afford on your income that is cheaper than rent, or buy a lower-priced home and fix up, even if only a cosmetic fix-up. If your payment was lower, there would be less concern about getting a renter. Then in a few years or sooner if you can pull it off, find another home or a home to upgrade too and then rent out the first home. Same can be done with a duplex situation as previously mentioned. Key to me would be safety of my own children.

Should I Buy a Bigger House?

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