Many seasoned real estate investors will provide a variety of reasons why you should buy an investment home before purchasing your own. Whether you are just venturing out into the world of real estate investing or not, this may not seem like a sound strategy. Afterall, it appears counter-intuitive to buy an investment home for someone else to live in, particularly if you are currently renting a place yourself. Real estate investors who do their homework, however, discover that this idea is not as irrational as it sounds. You have several real estate investment choices before purchasing a home on your own. Continue reading to find out why you should buy an investment home before purchasing your own.
Homes In Your Desired Neighborhood Are Out Of Your Price Range
If you live in or around any metropolitan area, the chances are highly likely that homes in your desired neighborhood are out of your price range. This may push you out of the market for purchasing your own home but it certainly leaves the door open for buying an investment home. Real estate investors purchasing an investment home in their desired neighborhood can always convert this to their own home at a later date. Moreover, the equity that builds in this home can be leveraged to purchase another house in the same neighborhood. In the interim, the investment home will be generating revenue that offsets the mortgage payments. If homes in your desired neighborhood are out of your price range, consider buying an investment home before purchasing your own anywhere else.
You Are Not Ready To Settle Down
People who are not ready to settle down for whatever reason, should consider buying an investment home before purchasing their own. An investment property gives you the flexibility to relocate freely, whether for business or pleasure, with fewer complications. In all likelihood, a move would not force you to sell your property particularly if you have created a network of trusted contractors. The investment home will continue to offset your mortgage payments while you enjoy your new surroundings. Investors establishing themselves as landlords when they are not ready to settle down, are actually creating stability for their financial future.
Buy Your Next Property
If you are a serial investor, you will probably be looking to buy your next property with the cash flow and equity from your investment property. This is a key advantage of buying an investment home before purchasing your own. The tenant’s rent payment that exceeds the amount of the mortgage is cash that investors can save toward the next property’s down payment. Additionally, the rent that covers the mortgage and improvements, creates equity in the property. Both the cash flow and equity in the investment home will help you buy your next property, which could be your own.
Buying an investment home before purchasing your own provides many tax advantages for real estate investors. Expenses like repairs and maintenance are deductible on your tax return when you own an investment home. Unlike an owner-occupied home where these types of expenses are solely out-of-pocket and cannot be claimed on your return. Another tax advantage for an investment property is the ability to depreciate it over time. This decreases your yearly tax liability which may be exactly what you need if you are in a high tax bracket. Of course, you will want to consult with an accountant or attorney to figure out which, if any, of the tax advantages for an investment home are beneficial for your situation.
Less Upfront Capital Option
Buying any type of real estate usually requires significant financial resources but there is an option that require less upfront capital. Investors looking for a less capital-intensive option should consider a real estate investment trust. This property investment vehicle gives you the ability to invest your money in commercial properties in a variety of verticals. It allows you to invest in real estate without the burden of being a landlord. Additionally, dividends can be cashed out or reinvested, giving investors the all-important cash flow or increased equity. Because it is difficult to get started without financial backing, this less upfront capital option just might be the way to buy an investment home before purchasing your own.
The concept of buying an investment home before purchasing your own can seem foreign and out of sequence. However, there are many reasons that make it a sound investment idea for real estate investors. For example, when homes in your desired neighborhood are out of your price range, you can get your foot in the door by purchasing an investment property. Moreover, if your lifestyle is influx and you are not ready to settle down, an investment home gives you the ability to relocate at whim.
Your investment home can also set you up to purchase your next property that very well could be your forever home. There are many tax advantages for investor that accompany the purchase of an investment home. Investors should also consider options that require less upfront capital like real estate investment trusts. Consider the points presented in this post as you ask, “Why you should buy an investment home before purchasing your own?”