Question: >COuld I get these two properties as (primary residence + 2nd home) and >then rent the second home after a couple of months (to avoid renting >intent at tie of purchase?) the thing is that I’d like to put the >minimum down on each property (Rates are very low) and if I have an >income property they will want me to put down a larger amount for the >other …
Answer: In 1996, I too wanted to buy a place and did. I had wanted to put down as little as possible, thinking it was better to keep my investments in the stock market and take a loan at relatively low interest rates. For various reasons, I could not get a loan. I cashed in most of my investments and bought the home. The Dow went bullish and roughly doubled from 1996 to 2002. On the other hand, my property appreciated amazingly, with my house investment roughly doubling, too. But the big advantage to me was not having to pay any capital gains tax on the home when I sold it recently. (I was below the $250,000 capital gains on home sales cutoff.)
On the other hand, weigh this against the likelihood of writing off a home loan’s interest on your Sched. A. Also, will houses appreciate like mine (and I think everyone’s) did in this period? Note that the rise in home prices undoubtedly was a result of the flood of cash from the bull market. Do homes normally appreciate in synch. with the Dow?
In sum, I think the timeframe for keeping these homes is something to consider when deciding whether to take a home loan or pay as large a down payment as possible.
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