should I buy rental property before buying a house

Today we’re talking about should your first property be a personal property or should it be a rental home. And of course, I’m going to give you guys my plan and why I choose my plan, and all the numbers behind it.

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Run Some Numbers ( when I do buy or if I do my rental property: and buying rental is not for everyone ) – I’ ’ll tell you why later
– The average life of a house is around 40 years ( very conservative)
– I buy this property and pay 250k Cash Money and cash flows very conservatively $1300 a month ( $15,600) – for return capital of 6.26% which is actually trash – because I’m not including taxes, maintenance, and insurance.
– let’s calculate the return over the life of the property ( 40 years x $15,600 ) – Ps this calculation is simplistic ( because rents increase over time ) but the answer is $624,000 of cash (2.5x on my money)
– On top of that if the property appreciated by 4% a year conservative ( this is also trash because effectively 2% goes into inflation) value 1.2M (4.8x on appreciate)

However:
– A lot of people may disagree and say Tommy ( you shouldn’t have paid for the property you should have just put down 20-25% earn a high return and let the tenant pay it off in 30 years and so on )
– But again if I want is security and control, that doesn’t help, because there are variables that can mess this up

Worst things that happen:
– Wars
– Depressions are real ( fed can stimulate the economy all they want, but in japan the fed tried stimulating it and it didn’t work for more than 10 years )
– Vacancies caused by unemployments
– Tax Law change
– You get disabled and you don’t have a way to make money anymore

The Good problems:
– Opportunity Cost: Index 8-10%, real estate conservative 6-8%, and then stock market career 20-30%
– But I rather start crawling before I start running and fall and break every bone in my body
– On honest that’s why you never saw warren investing in real estate in the beginning

Ideally: ( everyone has a road to success and you have to pick yours )
– What you want 8-10 cash on cash return
– And you want to make your money at the buy ( so if the property is worth 250k you don’t pay 250k you get a massive discount on it ( buy cheap or don’t buy it )
– However when the market is hot, it’ll be hard to find steals ( so you have to buy in areas that growing and have a long term perspective) – like warren switch from buying bad companies for a discount to great companies for a fair price and sometimes a premium

pS. Warren would disagree with me with this plan. Getting security from Mutual funds and real estate isn’t really the best idea if you can earn double the money somewhere else stocks. But I rather have that security first even if it takes me 2-4 years extra.

Also, This plan Might seem insane but it’s not: imagine if you 60-100k as a household a year
– You can take 5-10 years to pay off your primary property first
– Then another 5 years to pay off the second property which is the rental ( and as you get more properties, the next one will be easier to buy)

I would do it this way: When I get paid
– 3-6 month fully-funded emergency fund
– 20% Index Funds investing ( when you get paid ) 40 years you’ll have a lot of money here
– Debt 0% ( get rid of it ) before you start investing
– Expenses ( that mortgage and other cost – put all your money here to pay it off fast )
– Fun – 5%
– Charity 1%

It’s not an easy plan, but it works.
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*Some of the links and other products that appear on this video are from companies in which Tommy Bryson will earn an affiliate commission or referral bonus. Tommy Bryson is part of an affiliate network and receives compensation for sending traffic to partner sites. The content in this video is accurate as of the posting date. Some of the offers mentioned may no longer be available. I’m an Accountant but I’m not your Accountant, always review information with your Accountant/CPA and your Financial Advisor.

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