Looking to buy first primary - Help!!

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Looking to buy first primary - Help!!

Ryan Randall
NH · Member since 2016 · 56 posts · 73 votes

I've built up a rental portfolio of 8 cash-flowing units in a very solid area, netting roughly $6k/month. I've done this by living in them, and renting out the other units. It's worked out wonderfully, and I've been able to build solid equity while creating a strong cash-flowing portfolio in a good area.

My next purchase, however, will be my primary residence. I live in a fairly MCOL-HCOL, where I'd be looking anywhere from 500k - 900k for a purchase price. This would give me a PITI of up to $6.5k where I live (higher property taxes).

My question is, what is a reasonable PITI that I should be looking at, so that I don't overwhelm myself and can continue living a comfortable lifestyle? My thinking is, my real estate investments should be able to pay my PITI payments. My wife and I bring in roughly ~200k/yr, but I only work part time. I have no plans on going FT, and may ratchet down my work even less in the future. Any help/guidance is appreciated! I just don't know the best way to approach buying a principal residence, and what factors I should consider to continue living a lifestyle where money isn't a huge issue.

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  • Randall AlanPro Member
    Investor · Lakeland, FL · Member since 2017 · 1k+ posts · 1k+ votes
    3y

    @Ryan Randall

    I'm not sure we can answer this directly.  This is less a real estate question, and more a personal finance question which has other factors that come into play.  If you are still currently living in one of your rentals, you will obviously pick up additional rental income when you vacate that unit.  The bigger unknown is how much free money do you have left over each month in your budget?  What are all the other expenses you have to cover... car payments, insurance, etc. etc.

    Just like with your rentals, your personal house lender will be looking at your debt to income ratio... so obviously there is that... but from a "non-metric" perspective, you have to be comfortable that you can afford that new (big) monthly payment on your new purchase.  $6,500/month is a big 'nut' the crack each month.  

    In addition, I would do some forward looking analysis and ask myself, "If I qualify and buy this new big house, how am I going to be impacted if I want to buy my next rental property?  Your debt load is going to skyrocket, and your available 'free' cash is going to plummet.  I could sort of seeing you being 'house poor' because of the expense of your personal house which could very well make it difficult to qualify for your next investment property.

    Hope it helps!

    Randy

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  • Ryan Randall
    OP
    NH · Member since 2016 · 56 posts · 73 votes
    3y

    Thanks @Randall Alan, I agree that $6500 is a lot. Unfortunately, prices (like everywhere) have just been skyrocketing. Thankfully the cashflow from the 8 units helps offset.

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  • Brandon Elliott-Pandey
    Realtor · Erie · Member since 2022 · 194 posts · 88 votes
    3y
    Quote from @Ryan Randall:

    I've built up a rental portfolio of 8 cash-flowing units in a very solid area, netting roughly $6k/month. I've done this by living in them, and renting out the other units. It's worked out wonderfully, and I've been able to build solid equity while creating a strong cash-flowing portfolio in a good area.

    My next purchase, however, will be my primary residence. I live in a fairly MCOL-HCOL, where I'd be looking anywhere from 500k - 900k for a purchase price. This would give me a PITI of up to $6.5k where I live (higher property taxes).

    My question is, what is a reasonable PITI that I should be looking at, so that I don't overwhelm myself and can continue living a comfortable lifestyle? My thinking is, my real estate investments should be able to pay my PITI payments. My wife and I bring in roughly ~200k/yr, but I only work part time. I have no plans on going FT, and may ratchet down my work even less in the future. Any help/guidance is appreciated! I just don't know the best way to approach buying a principal residence, and what factors I should consider to continue living a lifestyle where money isn't a huge issue.


     Hey Ryan! First of all congrats man! You've laid the foundation for a great life and one many hope to have!

    Second, when it comes to buying a primary residence a local RELATOR can really help out in exploring your options and help you determine what is important to you. A GREAT Realtro will help you learn about location, amenities, proximity to shopping/family/events and at the same time help you learn what's important to you. There are many many reasons that are more emotional when it comes to buying a primary vs buying a rental/ investment property. If you would like to connect with a local realtor let me know. I'd be happy to introduce you to a few colleges since I live in CO! :-D

    Best wishes!

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