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Properties that would have a mortgage payment of $500 are renting out for $800-900. We have not found our ideal first home and are now starting to open up to the idea of buying a smaller/cheaper house that would be a good rental property. We could buy it, pay it off while living in it, and then rent it out and buy our ideal house. Did anyone buy their first house with this plan? How did it work out? Thanks!
I just bolded the one phrase. Be careful getting only $800 on a home with a $500 mortgage may not be cash flow positive after city tax, income tax, utilities, maintenance, insurance, HOA, vacancies and management fees. I would target closer to the $900-$1000 range but it requires some number crunching to be sure.
Yes I think it is a good idea to purchase a property that you can rent & live in today like duplex or home with a basement suite. There is no rush to get the dream home, so it could also be something smaller that you plan to rent out later.
The bonus with renting out part of the home now is that you get a great hands on landlord experience. I also find that you attract quality tenants (& parents willing to co-sign) when you say the owners are just above so this is a quiet unit.
Our first place was like a duplex where we lived above and rented below. The tenants covered the mortgage costs while we covered all the other expenses. So roughly a 50-50 share of all expenses, but our unit was nicer ;). I have heard of people living for "free" with tenants but I think that is quite difficult to find any deals like that. We now live in our forever home, it kind-of has a basement rental option, and a true mustacian would probably rent it out, but we like the space. We still have the duplex and rent it all out with just under $1000 cash-flow per month.
I am happy with what we did but wish we had started even earlier and bought a small condo about 5 years before the duplex instead of renting all that time.
Our Ideal Plan:
Year 0 Condo (live in with roommate, wish we had done this)
Year 5 Duplex (Live in half for 5y, good deal, great experience)
Year 10 Home (Live alone, keep renting the others)
Year 15 Multi-plex (Plan to do this soon)