Flipper/Rehabber · St. Pete · Member since 2016 · 4 posts · 0 votes
Hey BP, here is my dilemma. I just bought a new house on a USDA loan at 100% financing. As I was closing I got a huge promotion at work.... Here are my two options. 1. Start real estate investing (my plan is BRRRR, mareket about $150k homes). or 2. Buy new dream house and rent the USDA house I just purchased? Which way would put me further ahead. Both situations I have a home to live and my first investment.
More details... USDA house- $209,000 @ 3.5%= OTD PITI $1350
Your USDA home sounds like it will be a break even proposition if you rent it out but that's not a bad thing since you put no money down on it!
Do you have the money saved to buy a $150k home all cash to do a BRRRR? If so, then stay where you are and start your REI career by looking for your first BRRRR investment.
My personal advice would be to stay where you are, bank the extra money you are making at work and use that for down payments on future investment properties.
Yes we all want to live in our dream home as soon as possible. but wouldn't it be better moving into your dream home knowing you have 5, 6 or even more units bringing in enough cash-flow to offset some or most of the PITI+expenses of your dream home?
Your USDA home sounds like it will be a break even proposition if you rent it out but that's not a bad thing since you put no money down on it!
Do you have the money saved to buy a $150k home all cash to do a BRRRR? If so, then stay where you are and start your REI career by looking for your first BRRRR investment.
My personal advice would be to stay where you are, bank the extra money you are making at work and use that for down payments on future investment properties.
Yes we all want to live in our dream home as soon as possible. but wouldn't it be better moving into your dream home knowing you have 5, 6 or even more units bringing in enough cash-flow to offset some or most of the PITI+expenses of your dream home?
Does USDA not require 5-yrs of owner-occupancy? I'm far from a lending expert, but am pretty sure there are strict guidelines on renting or selling prior to 60 months.
Definitely do not get the dream house yet. The ROI is negative and it will keep you working forever. I live right next to dream house-ville and those poor folks work like animals to support their house payment, boat payment, car payments, etc and build no net worth.
My 2 boys play on the same sports teams as their kids. Dream house parents are always working and have a hard time attending events is how I know. Good enough builds wealth and freedom @Account Closed!
thanks for the advice guys. I really appreciate it. It seems like from people who have a "rich dad" mentality the general consensus is to stay put and start investing. And it would be sweet to buy a home I am proud of and satisfied with thru wise investments instead of more labor. To answer one of the questions , I don't have the money yet, but with my new income I am saving about $4k per month. And the loan officer said that there is no stipulation on the USDA home for how long I have to live in it. As long as when I initially bought it my plan was for a long term primary residence... My initial plan was to start investing but I got side tracked after calling the bank and here is why- bank said
But, will it generate 3 times the income when you move? (And if you don't move because it's your dream home, that's hardly a positive ROI investment, is it?)...
Jake Flumerfelt The answer is simple. Your primary home is not an asset, it's an expense. Same as a car a boat or a snow machine. It "cost" you money to keep it. An expense creates NEGATIVE cash flow. An investment property is an asset. An asset brings money in. It creates POSITIVE cash flow. If you follow the rich dad philosophy you don't create negative cash flow until your assets provide enough positive cash flow to pay for the expenses. Don't buy the 400k home. Its poor basic economics. Save the raise and invest it when you have enough. RR
thanks guys! I needed some sense talked into me/ reassurance that investing in this situation is the wise thing. It's hard to pass up on the dream home with prices going up. But I'm gonna do the smart thing and invest, after all my real long term goal is finical independence not a nicer home. Thanks again
I'm in agreement with the others (And you now too). Your dream house may expand in the future too because you will be making $15k to 20k a month passively and your dream house may be a 2 million dollar villa on the water instead :) and that that point, why not buy it :)
I'm living a bit below my means as well, and while it's challenging and my friends don't understand why I don't drive new fancy cars and have a big house, I know that it will pay off in the future. Also if you have any kids or young people who look up to you, it will teach them a good lesson in patience and in delayed gratification.