Home, Home on the Range? - Posted by Rich

Posted by Dave T on November 17, 1998 at 23:35:30:

The approach sounds fine. From 1980-1984, I bought my first five properties just that way. Of course, I was in the military and just bought a new home whenever I relocated. Once, I got my transfer orders just two months after closing on a house.

Shop for the best rate around. I am getting 6.25-6.5% owner occupant financing, while I am paying 7.25-7.5% for my investor financing.

Home, Home on the Range? - Posted by Rich

Posted by Rich on November 17, 1998 at 21:23:20:

Is it practical to buy a home to live in, get low interest(say 7.5%) bank financing, live in it for a little while, then buy another home, rent the previous home, and live in the new home until you buy another home, and rent out the previous home, etc., etc., etc. As long as the bank keeps lending the money at a decent interest rate, and I can rent each property for more than the mortgage payment, and I can afford the downpayments, does it make sense to do this? I’m currently working on my 3rd house this way. Any thoughts?

Re: Home, Home on the Range? - Posted by Bud Branstetter

Posted by Bud Branstetter on November 18, 1998 at 11:58:35:


The next wall that you will hit is that banks want you to have no more than 4 conforming loans(like FHA 3% down). There are ways around that but it costs more down(non-conforming) and/or interest.

Then there is a more current stategy if you like moving every two years. Buy undermarket, update as needed, and sell at the end of the two years for FMV. With the new law the gain is tax free each time.

I am not a fan of buy and hold, especially when you are on the hook for the loans. Ask yourself what cash return are you getting on the equity you have in those properties. Example: SFR with FMV 70K, mortgage of 50K at $500/mo, rents at 700/mo. You have $200x12mo/20,000 equity. That works out to only 12% return. What could you do with $20K tax free to invest.