Buy first home or invest?

Question

I'm hoping to pick some local REIs and realtors' brains here and get some advice.

My wife and I will be inheriting about $70k over the next year from her dad. My wife *really* wants to buy our own home since we've been renting for 2 years, settle in our 2 little boys' rooms, decorate, the whole 9 yards.

I'm leaning toward investing it first into some possible BRRRRs and/or flips since the market is hot and establishing some more passive income/savings but since it's coming from her dad, she's nervous about investing it in real estate rather than buying our own home now.

Should we buy now and take advantage of the low rates and then save to invest later? Keep renting and invest now? Any food for thought is greatly appreciated.

Also, another topic, we like the new Cadence community in old Henderson, but even their base price SFHs are still high for us (high $200s to low $300s). How likely are new builders to come down in price or include upgrades to get people in? I know they have their quotas but I'm not sure how lenient they would be considering the market is hot.

Account Closed · Answer

If you found a good home for say$250000 and go FHA you would only need $8750 down and payments would be around $1200 a month giving you cash left over for investments

JD Martin · Answer

OK, well take this for what it is worth: if I could go back in time, I would have lived in my van, put every dime towards my first investment property, cashed out, repeated, until such time as my fleet allowed me to have a healthy stream of investment income coming in outside of my W2 job. I do pretty well these days but there's no question my net worth suffered from putting money towards personal residences rather than investment property from the beginning.

Financially speaking, the smartest thing you can do with money is use it to make more money. A personal home doesn't qualify as an investment, as it is primarily your residence regardless of value, though it can appreciate and allow you to gain capital over time.

Account Closed · Answer

Make your wife happy first or you will regret it.  She is not being unreasonable.

But, in addition to using a low down program like FHA, you can select a home that will make a good rental down the road.

Torin Murphin · Answer

Account Closed thanks, Steven! My wife will like the idea of doing both with that FHA option more than continuing to rent and investing first. Definitely possible.

Nam Doan · Answer

@Torin Murphin my situation is a little different than yours but similar. My wife and bought an investment property with the mindset that we will move into it later on. Right now we have no kids so we rent a 1 bedroom apartment instead since we don't need the extra sq. ft. The house we bought is being rented and we'll move in when the time is right. The house has appreciated some so i'm glad I purchased it when I did.

Michael Lee · Answer

Hello and welcome to this website!  The typical residential loan is for 30 years which means you must stay there for about 7 years to make it your while.  Otherwise rent out a place where are not in charge for maintenance and capital expenditures.  A home is really a liability.  It only takes money out of your pocket.  If you would like to move around it is better to rent.  If you do not mind being in the same place for a long time buying a home is OK.  Rentals are a good way to go, even with a loan, is a good way to go as long as .you have positive cash flow even where you can add value.  Just own what is average for that neighberhood.  Investments that you have in rentals can have good debt.  It puts money in your pocket and typically has tax advantages and the renter can usually cover your debt payments with rent money.

Good luck to you!

JD Martin · Answer

Do both. Invest in a duplex. If they are not providing enough funding to pay for the house in full, I don't particularly see where you are obligated to take on a house payment in conflict with your investment goals. I'm guessing $70k isn't going to buy you a house, only a down payment.

Financially speaking, if you have to choose between buying your own house and buying an investment property, you are almost always better off doing the latter. Of course, you must have a plan - cash reserves, ability to manage, repairs, etc - but the same things that can go wrong in your house can go wrong in a rental, only the rental will be paying you rent, while your own house you will be shoveling money towards the mortgage.

Account Closed · Answer

I would look for a home first Henderson is voted one of the top best places to live. Vegas is on the rise.A home in a good location will give you not only appreciation but tax free primary residence appreciation. Your wife and kids will be happy the rates are low and you can always use the equity form your home or other sources of financing for investments.

Torin Murphin · Answer

@Joe Abughazaleh Thanks, Joe - good to know! We actually decided against buying there for now for those reasons and working on investing in some buy and holds first and then possibly finding a deal in Henderson we can rehab ourselves and make it how we want it for way cheaper.

Buy first home or invest?

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