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    Buying a second property for long term equity

    I’m trying to diversify and get into RE and avoid headaches that comes with dealing with tenants.
    My primary residence (650k) is almost paid off.
    Is it a wise idea to purchase a new home (price range 1.5-2M) in an upcoming, very affluent area and have my parents live in it? This way they take care of the property and when it comes time to selling it in x # of years the value will have gone up significantly. Goal would be to throw all the savings into paying off the new home asap.

    Thoughts?

    Buying a second property for long term equity
    byu/Busy-Association1036 inRealEstate



    Posted by Busy-Association1036

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    14 Comments

    2. BigJakeMcCandles on

      That’s a pretty concentrated risk. Historically, even in areas of significant real estate appreciation, i.e. California, the S&P 500 has outperformed.

    3. No_Rec1979 on

      Contrary to popular opinion, residential real estate is not a good investment and never really has been. People only think that because they look just at prices and fail to account for all the endless costs – finance charges, transactional costs, maintenance, taxes, insurance, HOA fees, etc, etc.

      If you want to buy your parents a place – good for you, by the way – your goal should be to buy something that checks all your boxes for the lowest price possible. Then if you have anything left you can invest it properly in stocks and bonds.

    4. Curious-Package-9429 on

      Your interest rate drag will mean you LOSE money, not gain it, from property appreciation.

      VTI+VXUS and chill.

      And I have a ton of real estate, I just carry no debt so take full advantage of appreciation. I buy in cash and load up on investments in the meantime.

    5. gryffon5147 on

      “Wise”? No. Especially if you’re not gonna live in it. And you’ll take out like a 7 figure loan for it? The mortgage, maintenence and tax is gonna be insane. And what happens when you wanna sell – just tell your parents to get lost?

    7. Fit_Driver2017 on

      Historically, RE does not give better ROI than SP500 index fund. But if you want to do it nonetheless, why not invest into FundRise or some REIT?

    9. Snaphomz on

      Real estate unless you choose it as a business is headaches. You should just invest in FXAIX and forget it

    10. OwnLime3744 on

      Don’t call it a primary residence for mortgage or taxes even if your parents are living there.

    11. beachteen on

      Not a good investment compared to investing in treasury bonds if your parents are not paying market rate rent. If the home appreciates 3% a year but you pay 6% in interest, plus property tax, insurance, maintenance. You aren’t making money

      Do your parents want a condo or townhome with lower maintenance, lower purchase price?

    12. redragtop99 on

      I’m in the exact same situation. I’m going to buy a nicer primary house and rent my paid off house next. I’m planning EXACTLY what you’re doing. I almost bought a $1.15M house this summer, and I live alone w my dog. (No kids, single, 44/M).

    13. Statistics_Guru on

      Buying a second property in an affluent area can be a good way to build long-term equity, especially since you already have low debt on your primary home.

      Having your parents live there also helps with upkeep and avoids tenant issues. Just be sure to consider the higher purchase price, property taxes, and ongoing costs.

      If the market grows as expected, it could be a smart move, but make sure you’re not overextending your savings or limiting your financial flexibility.

    14. FitnessLover1998 on

      Terrible idea. What makes you think a 1.5-2.0 million dollar property will appreciate more than putting it into other investments?

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