Why You Should Buy Your First House and Keep it as a Rental

​Every 4 years around this time, our country seems torn apart by opposing sides with different views about many things.  I think that it's important to also keep in mind that there are areas in which all tend to agree.  One of those ideas is that home ownership is generally a good idea for everyone.  This is why both parties have generally supported ideas such as Government assisted first time home buyer programs.

First time home buyer programs (are available to anyone who hasn't owned a home in 3 years) are an amazing opportunity for people to get into a house, start building equity, and eventually turn that primary residency into a rental for little money down.  This is great advantage of the US housing market because these types of loans aren't as common, if not available, in other countries. 
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Best Way to Get Into Real Estate Investing

​As mentioned above, first time home buyer programs are excellent ways to start your rental portfolio if you are in the position to buy and live in a starter home.  The advantage of this scenario is that you can pay as little as 3.5%-0% down on a home that you intend to live in as a primary residency.   Once you are ready to buy another house, you can then keep that house as a rental property and move to another home.  This is a great advantage because if you were to just buy a rental, you would need to put down 20%-25%.

​I mention that you will need to be ready to buy and live in a starter home.  This is important to understand because, depending on your market, buying a more expensive home can make it difficult for you to get cash flow (the money made on rent after all expenses) when you go to rent the property.  

​I have heard of engaged couples each taking advantage of these first time home buyer options before they're married/living together.  They both buy a house that could be used as a rental in the future and then live in one of the houses or buy a new home once they move in together.  This is a great idea for another reason as well, you are only allowed to borrow on a normal mortgage for up to 10 houses.  Married couples who buy houses as individuals would then be able to buy 20 total houses. ​

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Why You Should Keep Your House as a Rental

Keeping your house as a rental is a great idea financially.  Historically, real estate investment out preforms investing in stocks.  Your typical rental in the Harrisonburg area would bring close to $1,000 a month in rent in todays market.  Think about what that would be after the mortgage is paid off and rents have gone up!  Aside from the monthly income, there are some other clear advantages to buying and holding real estate.

Mortgage Payoff and Appreciation

Think about it, if you bought a $100,000 house on an FHA loan with closing costs covered by the sellers, you'd have to pay $3,500.  If you lived in it a couple of years and then started renting it out.  The renters would be paying down your debt for you while also paying you a lump sum every month.  On top of that, the house will go up in value, because historically housing has, and it could be worth $200,000 after the mortgage has been fully paid off.  Not a bad gig, right? 
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Tax Benefits

Another one of the benefits of owning a rental is being able to use a tax benefit called depreciation.  Essentially, owning property costs money to maintain and the tax benefit tries to account for that.   So, if your house was worth $100,000 at the time of purchase.  You would divide $100,000 by 27 to get your yearly deductible rate: $3,703.70.