Hey there, fellow real estate enthusiasts! It’s James Orr, and today we’re going to dive into a fascinating topic that’s sure to get you thinking about how you can achieve financial independence through real estate investing.
In a previous class, we covered whether it’s faster, less risky, and higher net worth to buy 20% down rental properties or buy 25% down rental properties. But in this presentation, we’re going to explore the impact of buying an owner-occupant property first before buying rental properties.
So, the question is: does buying an owner-occupant property slow you down? Does buying a property that’s more expensive than renting reduce your savings rate and slow down your ability to save up for down payments?
Or, does buying an owner-occupant property where the mortgage payment is fixed over time allow you to save more money and invest more in rental properties? It’s an intriguing question, and we’re going to dig deep into the answer.
The Impact of Buying an Owner-Occupant Property
Buying an owner-occupant property with 5% down payment and voluntarily paying private mortgage insurance can be a sound strategy for achieving financial independence through real estate investing. When you move into that property, you’re fixing in your cost of living expense, which means that over time, the amount that you’re able to save for investing in rental properties increases.
While at the beginning, it might seem like buying an owner-occupant property slows you down, in the long run, you’ll save more and have more to invest in rental properties. And at some point, when you pay off the mortgage, you’ll have even more cash flow to invest in other assets.
Comparing 20% Down vs 25% Down
So, is it better to put 20% down or 25% down for rental properties? Well, it depends on the city and the market. Based on my analysis of over 300 US cities, in about two-thirds of the cities, it’s faster to achieve financial independence by putting 25% down. In about 10% of the cities, it’s better to put 20% down. And in 20% of the cities, it doesn’t matter at all.
However, it’s important to note that the speed of achieving financial independence isn’t the only factor to consider. We also need to look at net worth and risk. For instance, putting 25% down tends to produce better cash flow, which means that it’s less risky than putting 20% down.
I should also point out that we did not apply any of the 88 strategies to improve rental property cash flow to these when we modeled them.
Achieving Financial Independence Through Real Estate Investing
At the end of the day, the goal of investing in real estate is to achieve financial independence. And whether you decide to buy an owner-occupant property first or put 20% or 25% down on rental properties, the key is to have a solid plan in place and to stick to it.
Real estate investing can be a powerful tool for achieving financial freedom, but it’s not a get-rich-quick scheme. It requires patience, persistence, and a willingness to learn from your mistakes. But if you’re willing to put in the effort, the rewards can be significant.
So, fellow real estate enthusiasts, I hope this presentation has given you some valuable insights into the impact of buying an owner-occupant property and the benefits of putting 25% down on rental properties. Remember, the key to success in real estate investing is to have a plan, stick to it, and always be learning and growing. Happy investing!