Starting Your FIRE

Should I buy an investment property while I’m still renting?

Many people are interested in FIRE, Financial Independence and Retiring Early. Often the “RE” part of the plan involves purchasing some investment real estate. Owning investment real estate is a great way to create a passive income stream. Buy a few properties and you may find that passive income stream becoming a torrent that provides more than enough money for you to live comfortably without working. Lots of podcasts talk about this approach to FIRE – including my podcast: Get Your FILL – Financial Independence & Long Life. Making lots of money without working sounds good, right?

You may be saying, “Sure Chris, that all sounds great but right now, I’m a tenant. Shouldn’t I buy my own house first before I start investing?” If you’re busy contributing to someone else’s passive income stream, it’s tempting to stop that flow and buy a property to live in yourself before starting your investing career. The problem is that often buying a house for yourself has a lot more limitations: location, condition, size, etc. and may be more expensive than houses that aren’t your ideal starter home. If you’re anxious to catch FIRE, consider these investing ideas:

• House hacking – If you buy a house and get a roommate to help pay the mortgage, you’re basically house hacking. I took a 3-bedroom ranch and turned it into a duplex. Now the Airbnb guests next door are paying my mortgage and expenses. Some homes allow you to add living space in the basement, garage or attic. This way you can have someone help pay the expenses and start the passive income flowing. Be sure to check with the city or town to make sure your plan will be approved before buying the home.
•  BRRRR – Buy, Renovate, Rent, Refinance, Repeat. Normally, this strategy requires that you buy the house with cash but if you live there, financing the home can work out also. If you’re even a little handy, you can buy a fixer-upper home. You’ll live in the house and Renovate it nights and weekends or whenever you can. Unlike a normal BRRRR, you’ll want to Refinance before you rent it so you can get preferential owner-occupant interest rates and mortgage options. Now Rent the home and Repeat: buy another home to move into and fix up. This can be tough – but not impossible – if you’ve already started a family. 
• Slow flip – This is similar to BRRRR but instead of keeping the home when you’ve fixed it up, you sell it. Normally, a flip is a quick transaction – buy and sell within 3-6 months. This can be tough if you’re working a 9-5 job. That’s why I call it a slow flip, you may live there for a year or more before the house is ready to sell. Whether to BRRRR or slow flip can depend on your situation and where we are in the market cycle. You should not be in a situation where you have to sell at a loss.
• Keep renting – Regardless of where you live, there is most likely an area not too far away where homes are affordable. Consider staying in your apartment for a year or so while you purchase one or more investment properties in these less expensive areas. I live in the Boston area. I purchased an adorable cabin in New Hampshire for $10,000 less than my client paid for a garage space in downtown Boston. That little cabin averages $1200 a month in passive income. Buying a few of those could finance an investment property closer to home – plus it doubles as a vacation home for me!

All of these ideas and more are in my book, Empower Your Inner Millionaire, which is free for a limited time on my website and we’ve had a lot of podcast episodes that cover these in more detail. I love helping people create financial independence so please get in touch if there’s anything I can do to help you ignite your FIRE!