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15k for down payment on personal home vs. investment property

K

khleung

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Jan 26, 2010
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Hi all,

I am looking into taking my first few steps into REI but would like to go on this journey with my wife. We currently rent a home that we are comfortable in and we have about 15k to use towards a down payment. I would like to use that down payment towards a REI and my wife would like to use it towards purchase of our own home. I`m trying to alleviate her financial fears of loosing our down payment by showing her that if we were to find a property with the right cash flow and set aside money from our primary income (my job) we could, hopefully in a couple of years, save up enough for a down payment for the purchase of our own home.

The thing is that this idea is all in theory and in my own head makes sense. My wife, completing her own due diligence on me would like me to produce some real world numbers or speak to someone who can either confirm or deny the validity or my thought process regarding my plans with our money.

So, if there are any REI in the Edmonton area who has wrestled with a similar scenario (REI vs. personal home) I would appreciate it if you could meet with my wife and I so that we could pick your brain on this matter. Any other comments or direction on this question would also be greatly appreciated.

Thanks

Kevin
 
If my wife wanted a home, then I would get a home.
Then if a few years, you can always refinance the property to get this money out to purchase an investment.
This is assuming the market picks up and estimated value of your own home is more than what you paid.

However, you might have to wait a long time in order for you to refinance because the amount you can refinance is usually:
(Estimated Value X .8) Less Outstanding Balance. So assuming you purchased 100K house now. With 15K, the outstanding balance is 85K.
In 4 years, the new value might be 120K. So 80% of this would leave you with 96K ...less the outstanding balance of 85K. Now you can take 11K.

So maybe a better option is to buy a bungalow with good partitioning, do a basement suite. Then convert this to an investment and buy
a house that your wife really wants (cathedral ceilings...new cabinetry..etc...).

I find that I get really good tenants if the owner lives on the top floor. This is what did last year.

My input,

Kir.
 
Happy wife, happy life

Go with the personal residence to start. Worry about tenants and investment properties later.

QUOTE (khleung @ Feb 1 2010, 10:14 AM) Hi all,

I am looking into taking my first few steps into REI but would like to go on this journey with my wife. We currently rent a home that we are comfortable in and we have about 15k to use towards a down payment. I would like to use that down payment towards a REI and my wife would like to use it towards purchase of our own home. I`m trying to alleviate her financial fears of loosing our down payment by showing her that if we were to find a property with the right cash flow and set aside money from our primary income (my job) we could, hopefully in a couple of years, save up enough for a down payment for the purchase of our own home.

The thing is that this idea is all in theory and in my own head makes sense. My wife, completing her own due diligence on me would like me to produce some real world numbers or speak to someone who can either confirm or deny the validity or my thought process regarding my plans with our money.

So, if there are any REI in the Edmonton area who has wrestled with a similar scenario (REI vs. personal home) I would appreciate it if you could meet with my wife and I so that we could pick your brain on this matter. Any other comments or direction on this question would also be greatly appreciated.

Thanks

Kevin
 
What can you afford based on income?
What about a property that allows you to live and collect some rent? (rooms, bsmt suite, etc) This will give you a taste of landlording.
I doubt your 15k will go too far.
Also, if you expect RE to appreciate the way it has in the last decade, you may be sorry. Remember the `90`s?
 
Why don`t you consider something that can sort out meet both goals. Depending on your circumstances and financial background, you could look for a home that with a suite or maybe a duplex that provides some additional income. It may not be the optimal home you are looking for, but it is a decent compromise and will help you move along to you next goals a little sooner.

Also, if you bought a home that needed some repairs etc, then you may have some good upside in a couple of years after some renovations were done.
 
We are in the same situation (although I am the wife) and we are going to buy a home that we can live in until we can purchase another one, hopefully in a year if everything goes well. We are purchasing a single family home, and plan on turning the basement into a legal suite (as long as there are no snags on the way - have done lots of research into this). After the year we should have enough for another down payment and then we can buy the house that is for us - and after a year or so we will have both a rental and a home for us. The reason we have are doing it this way is because the rental is alot less money than the house for us so we will be able to save more money faster this way and after the year, we will also be able to claim rental income as well if needed. The house we are looking at is nice enough but definitely not our "dream house" but it is bigger then where we are living now and we know that if we sacrifice now we will achieve our goals faster....good luck!
 
buy .. buy .. BUY your own home assuming

a) you can afford s.th. that you like
b) you intend to stay there at least 3 or 4 years
c) you live in an area of the world that will not implode, such as some BC mining town or small fishing village on the east coast or small hinterland SK or AB town with little commercial activity, i.e. in a town/city that will appreciate

Reasons
a) your wife wants to own

I can stop here. This is good enough a reason. If this is hard for you to accept, perhaps a visit of the marriage counselor is in order !

But there are two more:

b) Your appreciation in an investment vs. a personal home HAS TO BE TWICE AS HIGH to offset taxes payable !
c) you might as well enjoy the investment i.e. live in it

Now 15K is not a lot, so a 3rd option is to do not buy any and wait a year or 2 and make some more cash !

a 4th option is to compromise and buy a house you like to live in, but with a basement suite for add`l income to offset mortgage costs.

Related post:


5 ways to make money http://myreinspace.com/public_forums/General_Discussion/61-3347-5_ways_to_make_money.html

How to get started http://myreinspace.com/public_forums/General_Discussion/61-4391-How_to_get_started_.html

Where do you live btw ?
 
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