Skipping starter home and buying 4-5BR house?

[Anonymous]

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

Because most homes are expensive in this area and the rent is similar to the PITI or even less. For your example, let's say the Piti is 2,400 a month and you're saying it would rent out for 3,000 a month. If you have the place vacant one month then you already are down to an annual profit of 4,200. Now add in some repairs here and there and you're down to 2,000. If your tenant moves out you'll then have another month if not more of a vacancy and need to paint and perform repairs. It's just not a huge moneymaker. Can't you think of easier ways to make 2k a year without being a landlord?

I wouldn't assume most people make poor financial decisions on housing. I'm not sure why you think this. If anything there are a lot of people in DC who have made a lot of money in the housing market. I understanding naively thinking some no traditional setup might save you money but it's the wrong approach. You're much better off looking for a home that's underpriced and purchasing with an immediate equity build. So look at an up and coming neighborhood or a fixer upper. That's how you can make some money. Not by buying an already appreciated condo or town home and renting it out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

Because most homes are expensive in this area and the rent is similar to the PITI or even less. For your example, let's say the Piti is 2,400 a month and you're saying it would rent out for 3,000 a month. If you have the place vacant one month then you already are down to an annual profit of 4,200. Now add in some repairs here and there and you're down to 2,000. If your tenant moves out you'll then have another month if not more of a vacancy and need to paint and perform repairs. It's just not a huge moneymaker. Can't you think of easier ways to make 2k a year without being a landlord?

I wouldn't assume most people make poor financial decisions on housing. I'm not sure why you think this. If anything there are a lot of people in DC who have made a lot of money in the housing market. I understanding naively thinking some no traditional setup might save you money but it's the wrong approach. You're much better off looking for a home that's underpriced and purchasing with an immediate equity build. So look at an up and coming neighborhood or a fixer upper. That's how you can make some money. Not by buying an already appreciated condo or town home and renting it out.

OP here. I am confused because you seem to be making yourself out as an expert, but you are calculating returns on investment properties in a very incomplete way. So what if I break even on rental cash flow? The point is that the renter will pay the mortgage, so in the end I will end up with a $500K house that I can sell even though I only put $100K down.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

Because most homes are expensive in this area and the rent is similar to the PITI or even less. For your example, let's say the Piti is 2,400 a month and you're saying it would rent out for 3,000 a month. If you have the place vacant one month then you already are down to an annual profit of 4,200. Now add in some repairs here and there and you're down to 2,000. If your tenant moves out you'll then have another month if not more of a vacancy and need to paint and perform repairs. It's just not a huge moneymaker. Can't you think of easier ways to make 2k a year without being a landlord?

I wouldn't assume most people make poor financial decisions on housing. I'm not sure why you think this. If anything there are a lot of people in DC who have made a lot of money in the housing market. I understanding naively thinking some no traditional setup might save you money but it's the wrong approach. You're much better off looking for a home that's underpriced and purchasing with an immediate equity build. So look at an up and coming neighborhood or a fixer upper. That's how you can make some money. Not by buying an already appreciated condo or town home and renting it out.

OP here. I am confused because you seem to be making yourself out as an expert, but you are calculating returns on investment properties in a very incomplete way. So what if I break even on rental cash flow? The point is that the renter will pay the mortgage, so in the end I will end up with a $500K house that I can sell even though I only put $100K down.

I'm not making myself out to be an expert. It doesn't take an expert to know that you're not going to make a lot of money buying an investment property in an already peaked real estate market where the rent barely covers your expenses. It's a better option for someone who needs to diversify their assets and already has a lot of money in the market. Not for someone starting out.

Because you'll be lucky if the home appreciates 5 percent a year, especially if you buy a row home. Five percent isn't a huge return. Yes, you'll eventually end up with a paid off house but that's in 30 years. The majority of your mortgage payment the first ten years is interest. Take a look at the property price history for many condos and tow homes and you'll see that after 5-10 years of ownership many sellers are barely breaking even after selling costs. keep in mind when you sell you'll have to pay taxes and a six percent real estate commission.

Alternatively, you could invest 100k in the market and probably earn a 5 percent return or more each year. Some years you'll lose and some you'll win but historical data shows the market is a better investment vehicle than investment properties.

Seriously get out excel and do the math. It's really not that great of a return. You can easily beat it in the market. If you don't understand why rental income matters than you're not sophisticated enough to figure this out.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

Because most homes are expensive in this area and the rent is similar to the PITI or even less. For your example, let's say the Piti is 2,400 a month and you're saying it would rent out for 3,000 a month. If you have the place vacant one month then you already are down to an annual profit of 4,200. Now add in some repairs here and there and you're down to 2,000. If your tenant moves out you'll then have another month if not more of a vacancy and need to paint and perform repairs. It's just not a huge moneymaker. Can't you think of easier ways to make 2k a year without being a landlord?

I wouldn't assume most people make poor financial decisions on housing. I'm not sure why you think this. If anything there are a lot of people in DC who have made a lot of money in the housing market. I understanding naively thinking some no traditional setup might save you money but it's the wrong approach. You're much better off looking for a home that's underpriced and purchasing with an immediate equity build. So look at an up and coming neighborhood or a fixer upper. That's how you can make some money. Not by buying an already appreciated condo or town home and renting it out.

OP here. I am confused because you seem to be making yourself out as an expert, but you are calculating returns on investment properties in a very incomplete way. So what if I break even on rental cash flow? The point is that the renter will pay the mortgage, so in the end I will end up with a $500K house that I can sell even though I only put $100K down.

Do some research on the one percent rule. Also head over to mr money moustaxhe as many of his readers own investment properties. There's a forum and you should be able to post your situation and people will run the numbers for you.

http://www.investopedia.com/terms/o/one-percent-rule.asp

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

Because most homes are expensive in this area and the rent is similar to the PITI or even less. For your example, let's say the Piti is 2,400 a month and you're saying it would rent out for 3,000 a month. If you have the place vacant one month then you already are down to an annual profit of 4,200. Now add in some repairs here and there and you're down to 2,000. If your tenant moves out you'll then have another month if not more of a vacancy and need to paint and perform repairs. It's just not a huge moneymaker. Can't you think of easier ways to make 2k a year without being a landlord?

I wouldn't assume most people make poor financial decisions on housing. I'm not sure why you think this. If anything there are a lot of people in DC who have made a lot of money in the housing market. I understanding naively thinking some no traditional setup might save you money but it's the wrong approach. You're much better off looking for a home that's underpriced and purchasing with an immediate equity build. So look at an up and coming neighborhood or a fixer upper. That's how you can make some money. Not by buying an already appreciated condo or town home and renting it out.

OP here. I am confused because you seem to be making yourself out as an expert, but you are calculating returns on investment properties in a very incomplete way. So what if I break even on rental cash flow? The point is that the renter will pay the mortgage, so in the end I will end up with a $500K house that I can sell even though I only put $100K down.

Op you seem to know everything. You go and buy that investment property! The renter is paying the mortgage...of course it must be profitable! not.

[Anonymous]

Op that poster is giving you great advice. Do some real research.

[Anonymous]

Anonymous wrote:We're married and have no kids but planning on having 2-3 kids in the next 10 years. Is it weird to skip the starter 2BR house and go straight for a 4-5BR house? Has anyone done this before? We are thinking of getting a row house in the city, so presumably we could rent out the extra space until we need it. Thoughts?

How old are you and how soon do you plan on having your first child? If I were you, I would consider renting for a while. My husband and I bought a 2 bedroom condo when we were in our early 20s. Big mistake! We are now living in our third owned home. Here are a few things to consider

Scenario #1: If you were to buy a small place and rent it out in a few years, there is no guarantee that you would even break even on rent. You might not even find a renter. The house may sit vacant for a while as you continue to make payments on it. The renter might not be an ideal tenant. He/she may damage the house or refuse to make payments. That house will still be your responsibility. If there is a leak, you will pay to fix it. If the heater breaks, you will need to replace it. Also, there is the possibility that you will not qualify for a large enough loan for your new house because you already have a mortgage. Trust me... Owning a rental property is not always profitable. I have experience with this.

Scenario #2: If you were to buy a small place and sell it in a few years, you would need to pay loads of fees. A real estate agent usually asks for 6-7% in interest. Even if the house value increases by this amount, you will lose money.

Scenario #3: If you buy a large house, you may not find anyone to share it with you. Also, why would a young married couple want to share a large house with renters? And, your wants in a home might change in the next few years. You may decide you want to move out a little farther and get a backyard. You may discover that you prefer a different school district. Kids change your priorities. You don't want to end up in a house that ends up not suiting your family. Also, in a few years you may be able to afford (and want) something even nicer or bigger. However, you will be stuck in the house you have because it will not be worth the loss to sell it.

My husband and I were very anxious to own our own home and we thought we were making a great financial decision. We would have been better off renting and waiting a few years. Here are my suggestions: 1. If you have debt, pay it off. 2. Build up an emergency fund of six month expenses. 3. Max out your 401(k)s and IRAs. 4. Enjoy living in a rental with no responsibilities.

[Anonymous]

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

I would buy the bigger home w/a basement unit. I don't get the point of condos or 2 bedroom homes

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Why is it so hard to make profit on an investment property? I ran the numbers on rent vs. monthly cost of ownership and the cost is only 80% of market rent. We are looking at town homes so most do not have HOA fees.

Maybe I am overthinking things, but it seems like most people make poor financial decisions on housing because they are stuck on doing what everyone else is doing or chasing the dream house. I'm just doing research to see if anyone has experience with nontraditional setups. The non-complicated path to home ownership is easy to understand, that's why I'm asking about the complicated ones.

-OP

Because most homes are expensive in this area and the rent is similar to the PITI or even less. For your example, let's say the Piti is 2,400 a month and you're saying it would rent out for 3,000 a month. If you have the place vacant one month then you already are down to an annual profit of 4,200. Now add in some repairs here and there and you're down to 2,000. If your tenant moves out you'll then have another month if not more of a vacancy and need to paint and perform repairs. It's just not a huge moneymaker. Can't you think of easier ways to make 2k a year without being a landlord?

I wouldn't assume most people make poor financial decisions on housing. I'm not sure why you think this. If anything there are a lot of people in DC who have made a lot of money in the housing market. I understanding naively thinking some no traditional setup might save you money but it's the wrong approach. You're much better off looking for a home that's underpriced and purchasing with an immediate equity build. So look at an up and coming neighborhood or a fixer upper. That's how you can make some money. Not by buying an already appreciated condo or town home and renting it out.

OP here. I am confused because you seem to be making yourself out as an expert, but you are calculating returns on investment properties in a very incomplete way. So what if I break even on rental cash flow? The point is that the renter will pay the mortgage, so in the end I will end up with a $500K house that I can sell even though I only put $100K down.

Do some research on the one percent rule. Also head over to mr money moustaxhe as many of his readers own investment properties. There's a forum and you should be able to post your situation and people will run the numbers for you.

http://www.investopedia.com/terms/o/one-percent-rule.asp

I am not OP but like what you said about buying in up and coming neighborhood or a fixer upper. The only thing I see that is a potential problem in up and coming neighborhoods could be the average or sucky schools.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Are you sure about this bold part above??

[Anonymous]

Hi OP. I know that you want to make money. Trust me, I do. But there is no "hidden path to real estate riches". If there were, everybody would know about it.

You sound too young to remember this, but I recall in 2005ish, condos were going up like crazy. You could buy on spec, into a unit, in a building that wasn't built yet, for only like a $13k down payment. You would have a contract for a unit for like $400k but need to put just a small amount down and then ideally a year or so later when the building was built you would have a condo on your hands worth $500k or more because of the way the market was appreciating. Seriously people were buying into condos based on site design renderings....ground hadn't even been broken yet.

I bring this up as an example because "normal people" like you got into this. People who didn't even own a home to live in were buying their first home, on spec, because they too thought it was a "non traditional" way of taking advantage of the real estate market. Yes, plenty of people made money. But plenty of people lost a shit ton of money too. Because "non traditional" real estate ventures are not designed for the average person like you or me. They are designed for investors with more money and more knowledge than you or I have. And these investors--they have a home already to live in.

Based on your posts, I could imagine 10 years ago you getting into some silly get rich quick scheme like buying a condo on spec. And then losing your money.

Slow down. Find yourself a home to live in. Enjoy living there. Don't jump ahead to your real estate investment side job before you have even experienced home ownership.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:OP here. Thanks for the insight, everyone! I think we'll just go for the 2BR home and see where things go. We can afford the bigger house but would rather invest our money elsewhere for a greater return given that the other rooms won't be utilized and dealing with renters seems like a hassle.

Again you don't get it. Buying a 2 bedroom might cost you more in the log run. For example, if you buy a 500k 2 bedroom condo and sell in five years you'll be spending at least 40k to sell (realtor and taxes). You would have been better off spending 40k more over the course of five years in interest and principle on a bigger house. You wouldn't have to move and you'd have more flexibility in terms of space.

Your logic is only true if we can't afford he 2nd house without selling the first one. I think we will keep the 2BR as an investment property when we move later down the road. Having to move is not ideal, but since we are going to buy both homes in the same neighborhood, this seems like the best financial decision.

Problem is it is hard to own a profitable investment property in DC. You kind of missed the boat for buying an inexpensive condo and then renting it out. Prices have already appreciated a great deal. One option is to buy in a questionable neighborhood and count on appreciation but you probably won't want to live there in the meantime. You may be able to rent it out and cover PITI but that still doesn't leave you with that great of a return. A lot of condos in DC have high HOAs and some have rental restrictions. Also if you earn more than 150k (I would hope you do) then you can't deduct the mortgage interest on an investment property. You're most likely better off buying REIT shares. Fwiw, I'm a landlord.

Regardless, you seem to over complicate everything. First you're saying you'll buy a huge house and have roommates. That's messy. Now you're saying you have plans for an investment property and then another home. Why not keep it simple for your first home purchase?

Are you sure about this bold part above??

Yes