If money is an object, hold off on buying a home (Advice for novice real estate investors)

If money is an object, hold off on buying a home
(Advice for novice real estate investors)
By David Bramante

Most people new to real estate think that buying a home is the first step to living the American Dream. But really it is the largest investment most people will ever make and very few consider the alternative to buying a home, which is buying multiple unit properties.

With the same type of financing, you can actually purchase a 2-unit, 3-unit or 4-unit building. For first time home buyers, you can’t buy more than a 4-unit property because anything larger is considered a commercial investment and so the financing rules change, along with the requirements for down payment.

So rather than immediately buying a home, why not think about a multi-unit property? It boils down to what your goals are. So ask yourself that very question. Why do you want to buy a home?

For most people, buying real estate is an emotional decision, like buying a car. But don’t be like most people. Property and vehicles are investments. Be a novice real estate investor and don’t see homes for sale, just see houses on the market. Take the emotion out of buying because this is a long-term, serious investment that will take you 30-years to pay off. This is a major financial commitment and this is your future, so don’t be rash. Home is where the heart is, but houses are where the money is. Weigh the pros and cons.

So now think of buying a property as buying an investment. If I were to offer you an investment that gave you a greater return on your down payment, would you at least consider it? Honestly, why would any investor buy a 1 unit property, when he/she can get a 4 unit property for almost the same price and same great financing? The investor wouldn’t because it doesn’t make sense financially.

Let’s go back to the original question, which is what are your goals in purchasing your first real estate investment?

The main reason should be about creating true financial wealth, not be about satisfying a desire to live the American Dream in the traditional sense because the essence of the United States is not cute homes with picket fences. The US symbolizes the spirit of the entrepreneur, the visionary, the cowboy. And so when it comes to buying your first real estate investment, the American Dream is really about being an investor with the credit, liquidity and gumption to seize opportunities, where others see risk or lack the discipline to put their emotions aside.

Now, if money is not an object and you are financially comfortable, than go buy the most expensive house you can afford and live happily ever after. But, if money is an object (as it should be not matter what your financial status is), consider holding off on buying that house and start considering multiple units. You may decide that a house is for you and units are not, but know that there are many options when you purchase your first investment property.

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