Nice house pre kids or more money?

Question

We are still 1-2 years away from starting a family. My wife and I are pre approved for an FHA loan and want to buy a new build construction home that will be ready in 8-9 months. Base price is 500k with options about 550k. I know this is paying full retail and will appreciate slowly but will give us the greatest perceived happiness and fulfillment. The alternative is to delay more and get a good deal , a house we don’t like but add value/ remodel which I would rather do separate from the house I’m living in. I’m looking for feedback , perspective and guidance.

Julien J. · Answer

@Antonio Sosa

Real estate investing is a business, check the emotions at the door.

Think long term rather then short term.

On the first house, take a look at the house hack strategies.

Joe Scaparra · Answer

@Antonio Sosa, You do realize you are on an INVESTMENT REAL ESTATE website.  There is a huge difference between a Consumer of real estate and an INVESTOR of REAL ESTATE.

Your post is all about emotions, feelings, personal likes and nothing about investing, goals, objectives.  I say if you're more interested in living for today and not really wanting to build wealth or  become financially free then do whatever you heart desires.

Remember this: a house is not an investment if there is no objective to make money.  Living in a SFH with no focus on reducing your expenses and/or increasing your income becomes a liability not an investment.

Benjamin Sulka · Answer

Antonio,

If your goal is to build wealth with real estate, I parrot the above advice. Buy a 2-4 unit with your FHA loan, house hack, and move out after the 12 month requirement is up.

I'm not sure how old you are but try to think about delayed gratification. Sure it would be nice to live in a new build home today but house hacking will benefit your future self.

If you allow yourself to handle a little bit of short term discomfort, you'll get the long term glory!

You got this!

Michael Glunk · Answer

@Antonio Sosa I agree with Joe.

In the end, you should do whatever works for you and your wife. But if you are asking that question on this forum (as Joe mentioned) then you realize in the back of your mind that you should be thinking more rationally about this than emotionally. And you obviously want to be an investor so do it now or you'll be one year older when you do it!

I don't know your market and how often a great fixer comes along, what competition is like etc. I say this as on the surface a value add will typically always be the choice if you are trying to build equity, your net worth, and potentially cash flow. With that said, I live in Colorado. Finding a fixer is more difficult than finding a new build here right now (pending the specific area you live in). And there are many builders here giving out solid discounts/upgrades because their product isn't moving fast given the high rates. Because supply is so limited, the price you lock in at here with a builder is often a fair amount lower than it's worth at completion which can be a nice add if it happens. So net-net, run numbers on everything.

My personal opinion as a focus area would be a small multifamily with some value-add potential. Get one of those. Fix up the units to whatever makes sense in your market/neighborhood and rent out the units. Live in a unit (or units if you move as you fix) so you get the best financing. Do this again in about a year so you then have two small multifamily properties producing income. Then if you and your wife want your own space, then get that SFH with the funds created from these previous two properties. OR if you both are still willing, keep going with the previously mentioned strategy or some derivation of it until you don't want to do it anymore.

Good Luck!

Michael

Brittany Guimond · Answer

Speaking from experience — we did the "delayed gratification" thing prior to having kids by buying a small home in a good location and adding value over time, and we are SO happy we did it that way. Kids changed everything (at least for the first few years) forcing us to reprioritize for a bit and put the wealth goals on the backburner (hello daycare costs). When we finally felt like we had a handle on everything, we moved into a multifamily and househack it while renting our modest first home with excellent cash flow. Looking back, we're happy we invested when we did and had TIME to let it appreciate. Both energy and time are what we leveraged when we didn't have kids, and now we're reaping those rewards. Whatever you do, do it with intention, especially if you have goals you want to achieve. Good luck!

Zachary Ware · Answer

I have heard success stories here in BP where people bought a property lived in it for a few years, and then moved out and made it a rental. They continue this cycle every few years and you can accumulate quite a few rentals paying low down-payments like this. But moving into a completely turnkey property is not in your best interest as an investor, but maybe in your best interest as a homeowner. Imagine if each of these properties was fixed up while you were living there, you could be forcing a lot more appreciation in every property.

Rick Albert · Answer

There are pros and cons to buying new construction. A few questions that I think would be important to answer:

1. What are your long term and short term goals?

2. How is your time allocated? Do you have time to manage a remodel?

3. What kind of cash do you have? Do you have the cash to do a remodel?

4. What level of personal enjoyment would you get out of new construction?

5. The big question: How long do you plan on living there? If this is your forever home, then that is one strategy. If you are thinking short term, then it is another.

New construction can be a great investment. Low Cap-X and is already designed with current buyers and tenants in mind.

Denis Ponder · Answer

Agree with others.  Try to find a small multi you can house hack for a few years until you are ready for your primary.  Or, at the very least, try to find a single family home you can slowly update/renovate over the next two years and add value.  You will set yourself up better for success down the road and your future self will thank you.

Antonio Sosa · Answer

this is the kick in the but i was looking for. thank you!

Twannisha Jackson · Answer

get the house you want, stay in it a while (1-2 years) find another house, move in & rent the other out. sit on the new house & hopefully it appreciates. do what you feel is right for you.

Nice house pre kids or more money?

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