BUY more rentals or buy our dream home ???

General Landlording & Rental Properties
8yFollow

BUY more rentals or buy our dream home ???

Isiah Ferguson
Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes

With 2 free and clear rentals and solid jobs. Me and my wife was approved for 300k in buying power with Wells Fargo. Keep in mind we’re 27 years old, we have 2 children, and living in a 1 bedroom. 

My wife is all in getting our dream home of course. 

My business mind is thinking buy more investment properties. Also I’m thinking about the dream home because it was all a goal of mine to get the big house ? 

What y’all think ?

0Reply
28 views

Most Popular Reply

Caleb Heimsoth
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
8y
Go in between and buy a home but not max budget. You probably need a home with two kids. Plus the old saying goes “happy wife, happy life” probably applies here lol
4Reply
See this reply in the discussion

18 Replies

Jump to latestLatest
  • Caleb Heimsoth
    Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
    8y
    Go in between and buy a home but not max budget. You probably need a home with two kids. Plus the old saying goes “happy wife, happy life” probably applies here lol
    4Reply
  • Jim K.
    Handyman · Pittsburgh, PA · Member since 2018 · 5k+ posts · 13k+ votes
    8y

    @Isiah Ferguson

    Isiah, if you're in this business, then one of the things that needs to go by the wayside is the belief that you should buy a "dream home" anytime during your most active investment years. My wife and I have lived in construction zones now for six years and it's been one of our wisest financial decisions.

    The number one silly decision that will limit your capability to turn cash flow into net worth, that is, to save and invest, is spending too much money on your housing situation.

    Get a modest 3 bedroom as cheaply as you possibly can.

    The book to read that will convince you that this is your best strategy is Thomas J. Stanley's Stop Acting Rich...And Start Living Like A Real Millionaire. This was Stanley's last book, written well after he was catapulted to fame by "The Millionaire Next Door," his most popular book.

    2Reply
  • John UnderwoodPro Member
    Investor · Greer, SC · Member since 2014 · 13k+ posts · 17k+ votes
    8y

    Read the book Rich Dad Poor Dad. The house you live in is not an asset it is a liability. This is because it is not making you cash every month. Buy assets that will cash flow to pay for your house, cars, college education for your kids etc. Do this while you are young and you will soon not have to worry about money or if you were to lose your jobs.

    Put off that dream. 

    Buy a quafplex and live in one unit. Every 2 years but another and live in it. Do this a few times then buy your dream house and have it paid for from cash flow.

    2Reply
  • Isiah Ferguson
    OP
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    8y
    Originally posted by @John Underwood:

    Read the book Rich Dad Poor Dad. The house you live in is not an asset it is a liability. This is because it is not making you cash every month. Buy assets that will cash flow to pay for your house, cars, college education for your kids etc. Do this while you are young and you will soon not have to worry about money or if you were to lose your jobs.

    Put off that dream. 

    Buy a quafplex and live in one unit. Every 2 years but another and live in it. Do this a few times then buy your dream house and have it paid for from cash flow.

    Thanks for the feedback. Our free and clear units currently cash flow enough to cover our dream home. 

    Our assets ( rentals) are able to pay off our (liability) primary residence. Plus we both have jobs. 

    0Reply
  • Samuel Liapis
    Rental Property Investor · Chicago, IL · Member since 2017 · 83 posts · 46 votes
    8y
    Originally posted by @Isiah Ferguson:
    Originally posted by @John Underwood:

    Read the book Rich Dad Poor Dad. The house you live in is not an asset it is a liability. This is because it is not making you cash every month. Buy assets that will cash flow to pay for your house, cars, college education for your kids etc. Do this while you are young and you will soon not have to worry about money or if you were to lose your jobs.

    Put off that dream. 

    Buy a quafplex and live in one unit. Every 2 years but another and live in it. Do this a few times then buy your dream house and have it paid for from cash flow.

    Thanks for the feedback. Our free and clear units currently cash flow enough to cover our dream home. 

    Our assets ( rentals) are able to pay off our (liability) primary residence. Plus we both have jobs. 

    Yes but then you are essentially starting from nothing again. You wouldn't have any bills so that would be great! But you would only be able to save your income from your jobs to start investing again, whereas if you stay in your current situation, you could have the cashflow and your income to compound and buy more properties faster. So instead of a 300k dream home, you are looking at a 2.9 million dollar dream home in south Florida with a dock to park your personal boat.

    Ok that's my dream home, but still you get the point =D

    1Reply
  • Sam Shueh
    Real Estate Agent · Cupertino, CA · Member since 2016 · 4k+ posts · 1k+ votes
    8y

    Family comes on top of everything.


    1Reply
  • Jasmine H.
    Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes
    5y

    @Isiah Ferguson just wanted to see where are you now? Back in 2016, I wanted to put our savings to buying a family home. I saw my friends buying and wanted to so much have a beautiful home in a perfect neighborhood. I decided to use our money to invest and instead of one family home with one rental, we now have 4 rentals and one remodeled family home with an addition. I love what we are doing because i feel we are putting our money out there not only to build our family legacy but also to provide a good home for other folks. You definitely needed to get into something bigger with your growing family. Just curious what you ended up doing.

    0Reply
  • Isiah Ferguson
    OP
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    5y

    @Jasmine H. Hey now, thanks for reaching back. Congrats on all you guys success. Family legacy is super important and your doing it. As for me and my wife decisions we still have our 2 rentals free and clear. Looking to 1031 exchange our 1st buy. It has been great for the last 4 years, seriously no real problems with consistent renters. Looking back, we just don’t love the area. We’ll keep our 2nd rental, it’s perfect no complaints. When it comes to our dream home me and my wife meet in the middle. We still have great school and great neighborhood but we kinda too the millionaire next door approach. Great neighborhood, convenient area to highways etc & 5-7 minutes from my job. It’s not our “dream home” bit my wife and kids love it. Also, throughout the process i always kept in mind to buy a house which can be a potential rental long term. We still figuring things our moving forward. We haven’t yet use debt for a rental but our home is financed. As far as of right now, with the sale of 1 of our rentals coming up. We tryna see what’s a better route to take. 1031 exhange as I mentioned earlier or take the funds from the sale to payoff our primary residence. Also, we 100% consumer debt free expect our house & increased our earned income. But thanks for checking, we appreciate it. Best ofluck on your journey.

    0Reply
  • Jasmine H.
    Rental Property Investor · Houston, TX · Member since 2014 · 139 posts · 140 votes
    5y

    @Isiah Ferguson it's fantastic that the two of you were able to meet in the middle. Good schools and neighborhood is important for a family. We're kind of in somewhat of a similar predicament as far as what to do with our equity. I was all about paying things off because i thought it was the right thing to do and being debt free sounds amazing. I also find it a bit stressful to leverage and buy more. My husband convinced me to use our capital towards other investments because of the time value of money and the properties being paid off on their own over time. In 2018, we used our savings to buy an out of state investment and rented it out. It was a success so this year, we took a $100k cash out refi on our primary and used $30k of it to buy another out of state, that one is now rented out. I'm in the process of doing another $100k cash out refi with one of our in state investments and im torn between that or 1031 exchanging it. It's about an hr away from where we live. It also has a small hoa fee but the real kicker is every year they pick on all the properties and send violation letters to do work on them. I'm thinking of selling that one and buying something near our neighborhood. Doing this will not only increase our net profit by $200-300k, it'll also bring in the save us the commute and hoa headaches. So I'm kinda stuck unsure what to do. I wish choices were easier to decide on, lol! Anyways all the best and hope you make the decision that is right for you all now and for the future.

    0Reply
  • Dave FosterBusiness Member
    Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
    5y

    @Isiah Ferguson, Love the disciplined approach and debt aversion.  Having a free and clear primary residence is an enticing goal and it does increase your feeling of security.  But security against what?? A doomsday scenario where you lose your jobs and the rentals right?  Your cost for that is going to be the tax you'll pay by not doing the 1031 exchange.

    Given your disciplined life style I'd toss out this option - Do the 1031 but buy two replacement properties. Pay cash for one that is in as good a neighborhood and schools as you can find. Use the rest of your proceeds as a down payment on another rental where you'll be able to get not only the higher NOI from leverage but also the paydown of principle from the tenant making the mortgage payment.

    Once the dust settles you would have:

    1. A primary you like with some debt

    2. two free and clear rentals (the nicer one is your doomsday house for now).  

    3. One leveraged rental that has a very nice IRR because you're not just getting the rent every month. You're also getting that principle paydown which doesn't show up in your bank account every month but it increases your net worth every month - paid by the tenant.

    Once you get here you're options could be to:

    1. refi a rental if you want to pay off the primary so all debt is on rentals.

     2. Use every penny you can from all rentals to aggressively pay down the primary.

    3. Do another 1031 on the first property and buy what you would like to be your next dream house.  In a couple years sell the one you're in now and take that profit tax free.  And then "convert" the new rental into your next dream house.  

    All of those above scenarios would let you keep every bit of profit working for you instead of writing a check to the govmnt

    The 1031 Investor5137 Reviews
    WebsiteView Page
    0Reply
  • Isiah Ferguson
    OP
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    5y

    @Jasmine H. I completely understand. I swear I need a life coach. Me and my wife did not grow up with many choices and now we have so many ugh. But we are blessed. We are first generation when it come to investing, so we’re figuring things out on the go. It’s a journey and we are super positive.

    1Reply
  • Isiah Ferguson
    OP
    Investor · Charlotte, NC · Member since 2017 · 321 posts · 157 votes
    5y

    @Dave Foster Thanks for the feedback. Idk but I think so many options can be not so good lol. Your scenario giving sounds like a great idea especially to avoid paying the govnt any of my funds. I will consider both buying 1 rental cash and another leverage. I think that’s a win win. Keeping my primary with debt isn’t a bad idea either. It’s cheap financing and it’s only about 28% of my earned income. 1 of my free and clear rentals right now can wash the payment if need be as well. Manly, as long as me and my wife is on the same page, it’s all worth. With her it’s about comfort and stability, she can care less about buying property but understand what it can do for us. Somewhat complicated but we’re figuring it out. We’re first generation intentional wealth builders in our family.

    1Reply
  • Max T.
    Investor · Philadelphia, PA · Member since 2015 · 3k+ posts · 3k+ votes
    5y

    I would split the difference - go for a solid 3/2 in an appreciating area that you'd be comfortable in for at least 5 years, and that would also make sense as a rental after you move out. Bonus points if you can force appreciation while you're in there. Ideally you can put 5% down now, then rate/term refi in a few years after appreciation to drop your PMI.

    And I wouldn't sell the rental unless you really don't want it. I prefer to open up a HELOC instead - it is super flexible and cheap to set up.

    1Reply
  • Bud Gaffney
    Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes
    5y

    @Isiah Ferguson buy the dream home :)

    0Reply
  • Account Closed
    Investor · Singapore · Member since 2013 · 1k+ posts · 3k+ votes
    5y

    You need a larger home. It may or may not have to be a $300K "dream" house but if you can easily afford it why not? The point of life is to enjoy the journey. Obsessing over the number of "doors" or amount in your bank account or net worth has no value in an of itself. Its value is in enabling you to live you life to its fullest, no matter how you define it. There is a point of "enough". Learn to recognize your "enough" or you will put yourself on a never-ending treadmill of your own making.

    1Reply
  • Ryan Cleary
    Investor · Palm Beach County, FL · Member since 2019 · 370 posts · 330 votes
    5y

    @Isiah Ferguson

    Why not split the difference and buy a house-hack?

    0Reply
  • Javier Marchena
    Investor · Winter Springs, FL · Member since 2010 · 165 posts · 68 votes
    5y

    I would buy a house with 2 or 3 bedrooms that can perform as a rental in the near future. Use an FHA with 20% down and live in that house of a while. Then repeat.

    0Reply
  • Brian G.
    Rental Property Investor · Los Angeles, CA · Member since 2013 · 1k+ posts · 1k+ votes
    5y

    @Isiah Ferguson read @Dave Foster wrote again. If you plan to sell, his advice is very financially efficient for your situation if rightly applied. The big question in doing a 1031 exchange is whether or not you really want to hold a given property longterm. If not, what Dave suggests is great advice. It’s all about having an efficient portfolio that is in line with your risk tolerance and improving the quality of your holdings over time. Congrats on your success so far. Way to go!

    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free