Should I buy my own home first,
or rent and buy investment homes?
In markets where the
usually far property taxes, dwelling
more logical insurance or repairs as a
to be a tenant), you might, (in this
renter, while example) use a similar
owning amount as a 20% down
rental payment on the $1,400,000
properties in home (plus closing and loan
affordable costs), to buy about SEVEN
markets, rental homes in an affordable
where rents market, using 20% down on
are actually each all brand new in good
quite high as areas, for, say, $180,000
property taxes are high (like a percentage of the home each, in a market with low
in Texas and Oregon), and purchase prices. property taxes and low
insurance rates are high
(Texas again, for example),
the “no brainer” number
may shrink to $300,000 or
so, while the range above
Buying homes in
expensive markets
may not make
sense
insurance rates.
Each one of these $180,000
homes will fetch a rent of
$1,500 per month. Now that
is high rent! (as a percentage
which you may consider
renting your own home If you are thinking of buying of $180,000). Seven such
while buying affordable a home in the San Francisco rental homes, requiring a
investment homes in other Bay Area for $1,400,000, for similar total down payment
markets, will likely be example, and if that same as the $1,400,000 which is
$400,000 or above. This is home can be rented for rented and not bought, will
because with high expenses about $4,700 per month fetch a gross rent of
for property tax and insurance, (quite typical in 2018), the 7*$1,500 per month =
(which as a homeowner you math is in favor of being a $10,500 per month. That is
would be paying) the overall renter living in that house. indeed high rent. And these
numbers and logic “turn the While $4,700 per month will be brand new homes
corner” faster. appears to be very high (in which are fully under
absolute terms it is), it is warranty to boot. In addition,
Certainly, in expensive actually very low compared the seven new investment
areas like the San Francisco to the purchase price of homes can be diversified
Bay Area, Los Angeles, San $1,400,000. While renting over a larger geographic
Diego, New York City and the house for $4,700 (and area or even over more than
others such markets, it is not being responsible for one metropolitan area.
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