Rent or buy

[David Y.]

So I wondering if any other experienced investors out there could share your insights on Rent or buy the primary residence property?  I have $250k equity in my primary residence property currently. Should I sell it and use the $250k to buy 5 houses and get positive cash flow for $2000 and rent a comparable house in my area for $3000? I heard that buying the primary residence to live in is the worse form of REI investment, what do you think? Thank you for your insights.

David

[Rob B.]

I disagree that buying your primary residence is a bad investment. Especially if you are willing to buy a 4-plex and rent out the other units. The rate and down payment requirements are incredible, plus you will have an easier time qualifying. My wife and I move every year or so and keep picking up new rentals that way. I won't lie and say it's not a pain in the butt; but it's our retirement plan in action. 

Leverage is really key. Why not buy a 4-plex with an FHA loan at 3.5% down and then invest the remaining money into investment properties. Just remember your DTI, we had a ton of cash but we still couldn't purchase any more residential properties because of the number of mortgages we have (all cash positive), so we started into commercial as well. Now I'm getting ready to sell two investment properties so our DTI will be low enough to purchase another 4-plex here in the Bay Area.

Don't forget about the capital gains write off for an owner occupied property. If you live in it for 24 of the 60 months before you sold it, you can write off up to $250,000 in capital gains; $500,000 if you're married.