What should I do now with my first investment property?

Question

I recently bought my first investment property that will start as my primary residence with 5% down. The goal is to BRRRR it, as it required a lot of work, then house hack during the time I will be living there. From my understanding, I'll need 20% equity in the house for me to do a cash out refi which may take years to accomplish. Now that the rehab is complete, there's some equity in the property, and I'm moving in, I can't help but wonder if it's smart to take this time to do something on the side to pay down my mortgage faster or start educating myself on screening tenants and doing my due diligence. I would think having a landlord or rental dwelling policy is a much higher cost to be mindful of. I wasn't sure if other people at this stage when starting out feel the same way. Any advice is greatly appreciated!

Julie Muse · Answer

I think my biggest question is, whats your end goal? Do you have a family or a partner? If so, I personally don't think house hacking is what I would do.  But, I agree with the other gentleman mabye your getting into the weeds.

Nathan Gesner · Answer

A bird in the hand is worth two in the bush.

I see so many new investors lose thousands (or tens of thousands) every year by making rookie mistakes with existing rentals. Educate yourself on how to manage what you already have. An investor that doesn't know how to manage property well is only compounding problems by adding more properties. The better you manage your investment, the more money you will have to maintain the property or save up for the next investment.

Jonathan Greene · Answer

The best thing you said is something too many people miss. Your first investment property will be your primary residence. Yes. All real estate is an investment, even the ones you live in without roommates. Appreciation and all.

I think you are getting a bit in the weeds with the stuff at the end. It's a single-family that you want to room hack or two-family that you want to house hack?

John Mason · Answer

Make sure not  to get caught in small stuff like loosing 200 a  month on investment property :) It will pay off in a  year if your location is good!!

Mya Toohey · Answer

Hi!  I am a Realtor in the Clearwater/Tampa area.   Furnished Mid-term rentals are always a way you can go.  Three or more months and have the renters pay for water and electric but offer Internet and yard care.  It makes a great way for people moving or just staying for a short term period.  You also have them pay a deposit just like long term rentals.

Brandon Jones · Answer

Is there a reason you are wanting to wait 1-2 years to rent out the guest bedroom?

Scott Vaeth · Answer

@Mark DennisI've considered short-term at one point as well. It does seem like there are a few paths / exit strategies that I could take here in case one fails. It's also outside of the downtown Greenville city limits, so I can have an Airbnb legally if I choose to. Was your short term rental in Florida?

Scott Vaeth · Answer

@Nicholas L. Apologies for the lack of info here. I ended up getting in during a high interest rate at 7.5%. I figured this was a great value add opportunity and a way to lock a property before competition comes in when/if rates drop. This house qualified for a homestyle renovation loan so that's what I ended up doing. I ended up paying 5% down and 5% towards the rehab required.

3bdrm/2ba - 1627 sq-ft. - .5 acre (which is large for this area)Purchase price - $285KRehab - $75KARV - $400K PMI - $75Taxes - $2.4KRents - $1.9K - $2.0K (currently)I'm moving in with my partner, who will be paying rent. After 1-2 years of living in there, I'm considering renting out the guest room or building a second unit on the property via extension or adu then living in one of them. My short term goal is to cash out refi to get into another property but understand I would need more equity in the house. I guess my dilemma is the strategy to get to that point. The long term goal is to rent out to tenants long term and scale into multiple properties. As you can see, the numbers aren't great from a CoC return standpoint with current interest rates, but the location is strong - great schools, close to large hospitals, 10 mins from downtown, and popular suburban towns nearby. I think there's more here than an appreciation play.

Scott Vaeth · Answer

@Julie Muse My end goal is to rent the house out long term and cash out refinance into another property. However, I only put 5% down on the property, and it's currently being used as my primary residence, where I need to live in it for at least a year. I have a partner who will be assisting with my mortgage payments, so I'm hesitant on whether I should house hack, build a second unit on the property, or just live in it until I have enough equity to do a refinance.

Building a second unit on the property is an opportunity I see, but haven't dove fully into the numbers here.

Scott Vaeth · Answer

@Jonathan Greene It's currently a SFR that I'll be living in for now. I have a partner who will assist with the mortgage, but I'm considering renting out one of the other rooms after owning it for a year.

I have this idea floating around to build an extension on the property or a separate ADU and finance it myself prior to refinancing, but that might be a bold move this early on in my REI career.

What should I do now with my first investment property?

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