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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]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. [/quote]

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.  [/quote]

Your logic is only true if we can't afford he 2nd house without selling the first one.[b] I think we will keep the 2BR as an investment property [/b]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. [/quote]

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?  [/quote]

[b]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.[/b] 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[/quote]

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.

[/quote]

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.[b] So what if I break even on rental cash flow? [/b]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. [/quote]

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
[/quote]

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.[/quote]

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