The best answer quite honestly is any time you can buy a property and pay it off regularly like you're supposed to do a bank will look more favorably on you when it comes time to loan again. I would make sure that you keep enough liquid assets to qualify for a personal mortgage in the next 12-18 months though. Remember, lending qualifications have tightened A LOT and buyers, especially first time buyers, are finding it harder and harder to qualify for loans. Speak to a major lender and see what it would take to qualify for a loan and then decide how much investment property you can afford allowing for the maximum liquidity.
I would say it would be better to buy your personal home first. If you put your home purhcase after your investment purchase it could have a negative impact on you debt to income ratio. Be on the safe side. Buy for yourself first.
What is luring you to invest first? Is there a specific home available that would make a great investment property? Is it because you feel the prices are right?
Since you would be new at the role of landlord, it might also benefit you to live near your tenant. Would you consider a 2 family home?
In light of the current mortgage crunch it is difficult to know how buying an investment property may affect your ability to acquire a new mortgage in the near future. I would suggest that you speak with a lender for more credible opinions in this matter. I would say that if you are serious about owning income properties, that you build a relationship with one lender. A lender that you deal with on a regular basis, one who knows you personally is far more likely to be â€œmore understandingâ€ than a lender whom you have never met that sees you strictly as number on a spreadsheet, and dollars in the pocket.
Here is a possible solution that can insulate your personal credit needs from those of your business. It is relatively easy and inexpensive (a few hundred dollars) to form a corporation. You could then obtain credit for income properties via your corporation or LLC. Although you may have to sign a personal guarantee for the corporate loan, you would still maintain your personal credit and debt structure separate from that of the corporation. There are other benefits to incorporating as well, including possible tax benefits, your personal liability is limited, etcâ€¦
There are websites that help individuals easily form corporations in nearly any state you best feel has the most beneficial rules and laws.
Check out these sites:
If I can be of any assistance, donâ€™t hesitate to call or email me anythime!
I would focus on your home purchase for many reasons. You can obtain better financing on an owner occupied loan and a lower interest rate. If you purchase an investment property 1st and if there is a negative cash flow it will take away from your buying power down the road. In addition many lenders will only count 75% of the rents allowing for a vacancy factor when qualifying you.
Here's a thought have you considered combining both desires for a short time.. Perhaps buy an income property where you can also live in one of the units. You will get a better break on the interest rate and perhaps will not have to put as much down. As you are currently renting anyway this might be a good way to get started in ownership. Then in 12-18 months you could still buy a house and might be ahead of the game.
If the "income" property takes from you a negative cash flow (even a tiny negative ) - yes
To do as Greg suggested, plan to have enough cash in 12-18 months to make an adequate down payment on your own home.
Don't count on appreciation and rent increases in the investment property right away, investment real estate pays best when it is held for several years.