Buy Investment Property, Live With Parents OR Buy a Home, Move Out

[The BMW Guy]

My nephew is in a bit of a dilemna, and I thought it would be wise to get perspectives on the situation other than my own.

He recently graduated school, lives with the parents (no rent), making a decent amount of money that is starting to accumulate steadily. He's a smart kid, never buys anything that he doesn't need so he has quite a bit saved up (50-60k) from jobs throughout his schooling.

He's come across an opportunity to buy a new rental property but doesn't know if he should buy it or save up for a house to move out. He doesn't need to move out at all at this point in time, but does want to move out in 3-4 years time with his girlfriend.

The property in question is a unit near the new south hospital.

I advised him to buy the unit. I suspect that area's value will rise a decent amount in the next 3-4 years, making him more money than what his current savings are doing in the bank. I think the unit could also be self-sustaining if he can find long-term renters, building him equity. Should he want a house in a few years time, he can sell the unit and put that money towards a home. Or, if the unit is doing well he can simply keep it as a rental property.

What do you think?

[Kloubek]

Would he lose his first-time buying grant if he bought a rental unit as his first property?

No matter how you look at it, he is best off milking his parents for as long as possible for sure. One of the biggest reasons people don't get ahead is due to housing expenses they need to pay.... if he can get that out of the way and truly save all his money he'll be in an amazing position in a few years to purchase if he doesn't now.

[JordanLotoski]

Have him call me. I have sold 6 units by the new hospital this year and currently have an investment property there as well

[ercchry]

there are a few options... depends on the person more than anything. could do the old 5% down primary converted to a rental trick... he could do this twice, so 5% down on two places and like at home still, put together a 20% DP for his forever home...

or since he is young he could move into the second one and rent out extra rooms (who doesnt like living with friends when you are young?) would probably cover all sunken homeownership costs leaving his monthly amount owing to go straight towards the principle of the mortgage, so same position as living at home.... but not

[supe]

Originally posted by Kloubek

No matter how you look at it, he is best off milking his parents for as long as possible for sure.

I disagree. You're right in terms of a financial perspective but you have to consider lifestyle as well. Money isn't everything.

[Neil4Speed]

Originally posted by supe


I disagree. You're right in terms of a financial perspective but you have to consider lifestyle as well. Money isn't everything.

Your totally right, the lifestyle is fabulous.



haha, but in all seriousness, if you can live at home, and enjoy it (tolerate), your best off financially.

[The BMW Guy]

As far as lifestyle goes, he has no real reason to move out just yet. Him and his girlfiend adopted three large dogs that are doing well in their parents' massive backyads.

If they were to move out they would need a house that had a big yard while also giving them a reasonable commute to work. Very costly for them at this point in time in the current market. Hence why he is fine with being at home for the time being. However, he doesn't want his money to be sitting collecting tiny amounts of interest when it could be possibly making a lot more in a rental property.

Originally posted by ercchry
there are a few options... depends on the person more than anything. could do the old 5% down primary converted to a rental trick... he could do this twice, so 5% down on two places and like at home still, put together a 20% DP for his forever home...

or since he is young he could move into the second one and rent out extra rooms (who doesnt like living with friends when you are young?) would probably cover all sunken homeownership costs leaving his monthly amount owing to go straight towards the principle of the mortgage, so same position as living at home.... but not

I am not sure if his financial situation would allow him to pay the mortgage for two places should things go sour but I'll run it by him.

[Sugarphreak]

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[firebane]

Originally posted by The BMW Guy
As far as lifestyle goes, he has no real reason to move out just yet. Him and his girlfiend adopted three large dogs that are doing well in their parents' massive backyads.

That in itself will create a HUGE monthly cost for anyone who is a home owner on top of the already huge costs of owning/renting.

If he was so young and so good with his money is sounds like he is enjoying living at his parents and should just stay there. If he moved out I think he'd be in for quite a shock.

Also people don't realize how much stress this would put on the relationship and would test that as well.

[The BMW Guy]

He just graduated as a chemical engineer half a year or so ago. He is pretty young at 21. Seems to have a stable job, as does his girlfriend.

I'm pretty new to the rental investment scene, so correct me if I am wrong, but wouldn't a good screening of tenants ensure that you get someone that doesn't trash your place? It would be ideal to live in the same place as the people you rent to though, in regards to keeping an eye on them.

In regards to what he wants to do with his life, he has expressed interest in owning a small empire of 5-6 rental properties by the time he is 40. I am not sure if this is feasible but he likes the idea of getting a head start at a young age.
His current plan is to jump onto this unit near the hospital and pay as much of it off as possible. His girlfriend and himself are putting 20% down and dumping a significant amount of their money into it while they have very little expenses living at home. When they are ready to move out, they are hoping this unit would have appreciated in price which they can sell to use towards a home. Or keep it (if they are making decent positive cash flow) and take out another mortgage for their home.

As for the dogs, the cost isn't an unforeseen issue for them. They have had the dogs for 4 years now and budget accordingly.

[ercchry]

if thats his goal then i'd totally do the 5% down thing on a pair of properties, then stay living at home, get 20% saved up for a home with a basement suite and move into that... will be well on his way

ps: if thats his dream, then its going to require some risk. as long as he has a decent cash buffer (3 months rent/property) i'd say its will be safe enough. still young means still time to rebuild if shit goes seriously south.... also Sugarphreak is kind of anti-landlord... so remember that when you read his posts

[Mibz]

Originally posted by The BMW Guy
Him and his girlfiend adopted three large dogs

Stay at home.
Force the parents to form an attachment to the dogs.
When he breaks up with his girlfriend, move out and claim the dogs remind him too much of her so the parents keep them.
Profit.

[sputnik]

Personally... I would leave the girlfriend out of the transaction.

[nobb]

As mentioned above, it's best to leave the gf out (in terms of a joint contract for the mortgage) unless they really plan on settling down. Also, as an investment property you must have 20% down...you cannot do 5%. As long as he doesnt plan on living at home by the time he is 30 I dont see a problem with that. I'm doing a similar thing and have no regrets with my rental. It's a landlord's market right now and as long as you manage it properly, it should be cash + equity positive.

[ercchry]

you can easily have two 5% down rentals if you plan to live at home still

[Darkane]

Keep the girlfriend out! Man I can see this getting ugly.

All the houses should be under his name. They don't live together and won't for a while, being co-owners fucks shit up.

She'll let him do this because if she truly trusts him, it's not an issue.

[The BMW Guy]

Originally posted by ercchry
you can easily have two 5% down rentals if you plan to live at home still

I think my realtor mentioned that investors must have 20% minimum down, if you plan to live on the property, then it is 5%.

Having the property in his name shouldn't be a problem, good call in case things go sour with the relationship.

[ercchry]

yup, but no one can predict the future... if you catch my drift

[Isaiah]

Originally posted by ercchry
could do the old 5% down primary converted to a rental trick... he could do this twice, so 5% down on two places and like at home still, put together a 20% DP for his forever home...

Originally posted by ercchry
if thats his goal then i'd totally do the 5% down thing on a pair of properties, then stay living at home, get 20% saved up for a home with a basement suite and move into that... will be well on his way

Originally posted by ercchry
you can easily have two 5% down rentals if you plan to live at home still

Please repeat it again just so we're clear.

[Sugarphreak]

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