Buying your first home can be a big achievement for many young people. It gives them their first big investment that they hope will increase in value and make them more money overtime. The truth is, however, many young people don’t realize that their primary residence isn’t actually an asset, and as they do normal maintenance, renovations, and upkeep, it will end up costing them much more than they’ll ever make when they eventually resell it.
Luckily, there are a few different ways to turn your first home/residence into a true, income producing asset while still living there and calling it yours. This is how to become a mogul starting with your first home!
Option 1: Buy A Multifamily Unit
The overall best way to become a real estate mogul with your first home is to buy a multifamily complex. This could be a duplex, triplex, or quadruplex, and it will allow your first home to instant start producing an income and making money.
The great thing about this is you can get an FHA loan on a multifamily complex up to four units — a quadruplex. Thus, you’ll only need a maximum or 7.5% down. That means you could get 3 additional income streams from your first home for just 7.5% of the purchase price of the complex. You then live in one of the units and pay all of the income from the property towards the mortgage. By doing this, you’ll pay it off in no time.
After that, you pull out the equity in the complex and purchase a few more complexes with 20% down conventional loans. You then put all of those units income into paying off those mortgages. Once you do this a few times, you’ll have thousands and thousands of dollars in income every month.
Option 2: Rent Out The Spare Bedroom
Thanks to AirBNB, Tripping.com, HomeAway, and more, renting out an extra bedroom has never been easier. If you live in a suburb of a large city, in a large city, or in a tourist city, this can be a great way to generate enough income to not only pay your house payment but pay it down quicker than you would have previously.
Once you’ve paid down your house enough, you can pull the equity from it using a home equity credit line, and then move into vacation rentals, flipping houses, or general long-term rental properties. The choices are endless.
Another advantage to renting out the spare bedrooms is the fact that you’ll be able to meet a lot of different people who are traveling and wanting to experience a new place. Chances are you’ll make some friends along the way, and you’ll be the owner of your very own home.
Check out these 4 Tips Every Home (or multifamily complex) Buyer Should Know!
Option 3: Buy A Fixer-Upper
This option is not for everyone. There are very few people who can buy a fixer-upper as their first home and make a good profit on the purchase. It’s also hard to live in this home, but if you work with a Realtor® and have your expectations set right, this can be a great way to make some liquid cash and start building your real estate empire.
Something that is worth mention here is you will most likely have to buy a fixer upper on an 80/20 conventional loan which means you’ll need a 20% down payment. You also need to have enough liquid cash to actually complete the repairs. Basically, you need a lot of money to make this work, but the return could be huge.