Should I use my home as my first investment

Question

I am trying to decide my best strategy in developing my investments.  I currently wholesale properties, but I am much more interested in flipping and rentals.  My single family home in South Florida is financed for 185k at 3.5% fha.  It has had some upgrades, but could use more.  It has a legal addition in the back as a "Florida Room", but some work has been done (before we bought) to turn it into an efficiency.  The main house is a 3/2.  Comps are in the mid to high 200's.  I know that the best option may be to finish the efficiency and rent out, however, I have 3 young children and am just not comfortable with "house hacking"  because of it.  I may be paranoid, but it makes me uncomfortable.  Also, we don't love our area and would like to move in the next year or two.  Given that our interest rate is so low, I am nervous about refinancing to perhaps get some cash out to invest in another property, but I'd like some input if that may be a good option.  We could also sell, but finding a rental for what we pay now would be impossible and if we bought again, we would need most of the money we made from this house for that.  We could also rent out the entire house and efficiency, but again, we would likely have to rent for a year to establish the income from the rental before purchasing again.  I would love to hear some feedback as I feel like I am living in a great investment and I'd like to be able to utilize it to jumpstart future investments.

Michael Lee · Answer

Hello and welcome to this website and asking such a good question!  Yes, if you can personally benefit from it, I think it can be a good idea.  I have been in my house for about 32 years years and it has more than doubled in value since we built it but it still costs us about $10,000 a year but the property taxes in Texas are pretty high, about $6,000 per year. Being born in and raised in Dallas Texas has taught me a bunch of things that I can pass-on to others because I have learned so much in 60 years.  I am lucky that my wife is very frugal and she has been saving money from her work for about 25 years.  Since my brain annu rims and a stroke 6 years ago and still not walking I have learned from this site for about the last 18 months and not felt a bunch of stress.  My daughter is now in her 3rd year at the Univereity of Arkansas and school has gotten pretty expensive since me and my wife went.  I must say that I am very proud of her and hope that she does well.

She even still works out, all 113 pounds of her, makes me happy about her life.  Her boyfriend is actually from Arkansas and everybody likes him including my parents so she has not been very effected by her red hair.  She definitely benefitted from being a high school band member.  Being involved with that organization for 5 years has really helped her.  She even went to Europe with that organization and had a good experience.  Her high school band leader has now died but he did such a good job.  What I used to do allowed me to be around my daughter a bunch when she grew up and, as it turns out, I was very lucky to have that.

Your living place can allow you to buy it and benefit from its existence and benefit from it.  But you need to do that for at least seven years to really start building equity.  Try to get your loan amortized for 30 years and pay principle on it early so you can benefit from that and do it when you can afford it.  Since you allready have some experience with wholesaling you can keep doing that and add some Fix and Flips with that and increase your short term profit.  I think that if you can do wholesaling you can do anything else just continue to educate your self to help you be financially free.  The need to educate yourself through your life will help you know how to do things and know what to expect from others.

Since there is so much money around it does recruit crooks that will try to emotionally sell you and take your money.  So be aware of that and watch out for others that are trying to cheat you.  Do not trust anybody you do not know well.  Do not make any false assumptions about what other people should know.  Do not use any excuses for what you have experienced and try to blame others for a mistake.  Mistakes will happen and knowing that it is a way to learn and keep on trucking.  I do not know if you have done any reading but try to fit it in to your schedule.  I do not know if you have heard of him, Robert Kiyosaki, has some interesting things to say about life and what you should expect to happen.  He also talks about preparing and staying in control of your life.

I am on his fourth book now and interested in what he has to say.  His main book "RichDadPoorDad" is very good and teaches you how to deal with others and things you should be doing.  What he says is very useful and true and it is something you can learn from.  One of the things that he harps on is about being responsible personally and to not depend on others or things.  He also gets into your personal way to deal with things and how to be reposible for everything that happens and how schooling can help you figure things out.  You are in a good state but always do your math analysis and try to look at the prospective projects before you make an offer or at least have a clause in the sales contract that allows you the time (usually 10 to 15 days) to make a detailed inspection of the subject property and possibly back out of the deal without a penalty that will hurt you too much.

I know that this is getting lengthy but I have a bunch to say.  Hopefully, you are doing this out of a formed legal entity that will protect you personally from any legal action.  Track everything you do and review it regularly to look at your expenses and how you might be able to reduce to reduce them and how to possibly possibly increase your income.  I read about two books per week and they definitely help with my thinking.  Also, if you have YouTube there is some stuff to learn from there. Since I cannot walk yet and I learn for about 8 to 10 hours learning every day (7 days a week) and that might be one reason why I have so much to say.  Know that you can benefit from your learning and stay under control that you maintain.

Good luck to you!

Netalie Sivan Santos · Answer

My goal is to produce enough passive income to be financially free and move my family to a Southwest Ranches style area...eventually.   I strictly wholesale at the moment and am doing ok in that it has more than covered my previous part-time income allowing me to work form home.  I'm happy with everything I have learned from it, but I feel the need to make bigger moves in real estate investing. We have been going back and forth about using our efficiency as a rental and that would pay more than half our mortgage, but I have reservations.  I also feel that the market may slow down a bit soon and it may be the best time to sell.  I'm unsure, but I no longer want to wait while the opportunities are available.  I would like whatever I decide to do with my home to ultimately help jump start my investments in rentals and/or flips.