Step 3: BUY (again)

If you’ve made it to this step, congratulations! All of your ducks are in a row and you’re ready to buy again.

Just like when you bought your first home, you will need money for another down payment.

But unlike last time, you now have an appreciating asset in your portfolio which gives you more options.

1. Your savings -

If you have the money saved up, great! Let’s put this money to work and invest it in your new home.

If you don’t have the money saved up, you have a new option available to you.

2. HELOC (home equity line of credit) -

This gives you access to cash by borrowing against the equity you have in your home. It’s a line of credit and since you are “borrowing” you will have to pay interest on the borrowed amount until it’s paid back.

But don’t worry, we are using the HELOC for another investment so don’t let the interest payments scare you. I don’t advise taking a HELOC out for a boat or your dream vacation. You are borrowing money to invest with the idea that the investment will pay you back much greater in the long run than the interest payments in the short run.

Once you have money for a down payment which could be as low as 3.5-5% down, the next step is easy. It’s just like when you bought your first home. You need to identify what you want and how much you can afford.

From there, we run the numbers and factor in the cash flow from your new rental property to see what makes the most sense for you. 

At this point in the strategy, you already have a home and you might question whether or not you should buy again.

Personally, I just went from a 3% interest rate to 6.5% and yes my payment is significantly higher BUT,

my new payment is only one metric. I’ve also upgraded my home, I live in a nicer area, and my kids will go to better schools. Plus, I’ve added a new property to my portfolio, another appreciating asset with tax benefits while someone else pays off my other home(s).

I will gladly pay more for all of this, especially knowing that my payment will only go down from here when it’s time to refinance.

When looking to BUY again, you should also think about competition in the market. Interest rates are definitely higher than they were a few years ago. At the same time, houses are sitting longer than they did during that time. 

Again, time in the market is better than trying to time the market. If you can get into a house today, do it. You secure the property, avoid bidding wars, and you can always refinance the property when interest rates drop. 

QUICK HISTORY LESSON: 

I often hear people talk about how low interest rates were during COVID. This is where many refinanced their homes to 3% and below.

During this time, you have two kinds of people. 

1. The people who already owned their home with a higher interest rate.

2. The people who were looking to buy their first home. 

The people who already owned, despite having a higher interest rate were in a position to quickly and easily refinance. Not to mention their home equity skyrocketed!

The people looking to buy because of the low interest rates were faced with high competition and many offers going $100,000+ over asking price. 

I can’t stress this enough, time in the market is better than timing the market. Get in when you can and set yourself up to refinance when the time is right.  

There you have it, the BUY RENT BUY strategy. 

Now you know how I bought 5 homes in 8 years without selling my primary residence. 

I’ve proven that you don’t have to be an “investor” to invest in real estate. 

No matter where you’re at in your real estate journey, I’m here to help you and have the experience to back it up.

Schedule your FREE consultation here, let’s map out a plan, and get you where you want to be.