Today’s feature comes from Michael Moore @MooreThanRealEstate (Instagram). His first real estate property was a multi-family home–a duplex. Here he tells you why your first house should be an investment property.
The process of buying a home can feel like a big scary rollercoaster ride. Once you get to the end, you realize how rewarding and thrilling it can be. After purchasing my first multi-family home, I can definitely advise you to do the same. There are three reasons why you should consider investment properties as your first property:
1. Low Down-Payment/Low Start-Up Cost: You will be able to utilize FHA financing to buy your home as a first-time home buyer. This allows you to put a minimum down payment of 3.5% of the cost of the home. FHA financing allows you to buy a property with 1 to 4 units. You can potentially live in one unit and rent out the other 3 units. Tip: I found out after my wife and I purchased our first investment property that we should have each purchased an investment property separately before getting married. This will allow each of you to take advantage of the low down-payment cost and double your investment potential. For example, instead of 1 to 4 units to rent combined, you could have 1 to 4 units each!
2. Income Generator-Gateway to Financial Freedom. The top two most expensive items most of us will purchase in our lives are houses and vehicles. Not everyone needs a car but no matter what you do in life, you will need a place to live! By purchasing a multi-family house, you’re not only making one of the most expensive purchases in your life but you are also generating additional income. For example, a property with two units rents each unit at $750, with a total of $1,500 monthly rental income. This property has homeownership expenses of $1,095 monthly (i.e. insurance, mortgage payments, and property taxes which are typically made as one monthly payment). In this scenario you will have a $405 profit/cash flow monthly ($1,500-$1,095). This translates into a yearly passive income of $4,860 ($405 x 12 months) from one property. More properties will allow you to multiply your profit/cash flow which can lead you to your financial freedom!
3. Quality Of Life. My sole purpose to purchase income properties is to improve my family’s quality of life. The more properties I purchase, the higher my passive income. This will allow me to retire early and enjoy life even more. Most people in America spend more time at work than they do with their families or doing what they enjoy. I love spending time with my family and I will do what I can to make sure I spend more time with them than at work. Investing in real estate and owning rental properties will help you generate positive cash flow. If you are looking for a way to live a better life with your family, assess the risks you are willing to take and if you can, invest!