Your first real estate investment should be your home, if you don’t already have one. Now let’s complicate things. If you already have a home and have built up equity in it, consider moving to a bigger home and converting your existing home to a rental. By making this move, you will be improving your portfolio position by upgrading to a higher-value home. Your existing home will probably be a good rental, unless it is very expensive.
If you don’t want to convert your existing home to a rental, consider either selling your selling your Los Angeles home or refinancing it and using part of the money you generate to fund your real estate investing business. If you decide to sell, use a small portion of your proceeds on the sale as a down payment on another home that you can live in, so that you can benefit from the appreciation.
Maybe the scenario we just described struck you as unsettling, because it involves change. Yet change is exactly what you need to embrace right now in order to reach your goals. And although you may not have thought of it in just these terms, change is the main reason why you bought this book. So get ready to embrace it!
If you have never owned a home, consider making the move now. Given the favorable interest-rate environment, your opportunity is the best it has been in years, and the best it is likely to be until the next economic cycle. This could be a long time, since the last time we had rates in the 6 percent range was about 30 years ago.
In many major markets across the country, double-digit appreciation has made home buying a very smart move indeed. Even in the vast majority of “softer markets,” home appreciation still beats inflation by several percentage points. Appreciation, combined with low down payments, means positive leverage that works in the homeowner’s favor.