Buying a rental investment property for short-term purposes

[Aniket Patkar]

Hello there! 

New member here. I wanted to get experienced opinions on our situation. My wife and I currently own a house in Royal Oak, Michigan (Metro Detroit). we have decent equity in the house as we bought it in 2017 and have 2.65% mortgage rate. 

Our main plan is to get a bigger house in near future (4-5 years) and keep this house as a rental property. We also have good enough cash put aside for a %20 down payment. We are not going for the house right now as the market is inflated and the interest rates are much higher.

We are thinking about buying a smaller property using that cash for rental investment in the mean time. Planning to buy it now, rent it out for 4-5 years and sell it when its time to buy the bigger house.

Do you think its financially wise to go through this process before the big house purchase? or Do you think its too much of a hassle and not enough profit margins for a property to give net positive gains and possible house appreciation? Since we are total amateurs, we don't which way is better (either get a property for short term or invest that extra cash .

Any help will be appreciated! thank you.