Coming up with a sizable down payment is one of the key barriers to affording a home. Learning how to invest your down payment if you’re planning to buy a house is a whole other issue.

On the one hand, you want to invest your down payment conservatively so that’s it’s available once you find your ideal house. On the other hand, you would ideally like to invest your down payment so that it grows even bigger. With a bigger down payment, you can lower your monthly payments or buy a nicer house.

This article will give you a framework on how to invest your down payment based on when you plan to buy. The longer out the timeframe, the more aggressive you can invest your down payment and vice versa. Despite a bull market in so many asset classes, investments do lose value sometimes. You don’t want to be caught in a down-cycle right when you want to buy a house.

Currently, demand for property is very strong because mortgage rates are near record-lows. Further, since we’re all spending a lot more time at home, we are utilizing our homes more. The intrinsic value of real estate has gone way up as a result.

One of my financial regrets was not buying a multifamily investment property in my late 20s. Instead of taking advantage of multifamily investment opportunities to generate more passive income, I decided to buy a four bedroom, three and a half bathroom single family home and live larger instead.

The house wasn’t huge at ~2,300 sqft. But it was too big for my girlfriend and I at the time. Two bedrooms and two bathrooms were hardly ever used. Not only was there so much wasted space, the house was a suboptimal use of $1.52 million. Taking on a $1,216,000 mortgage that cost $6,200 a month was a lot and sometimes stressful.

In retrospect, a better choice would have been to buy a two-unit building for a similar price. Each unit would consist of two-bedrooms and one and a half bathrooms around 1,350 sqft each. My girlfriend and I would live in one unit and rent out the other unit for at least $4,000 a month.

Not only would our living costs have been so much lower for more than a decade, our passive income today would be at least $2,000 a month higher. Investing in multifamily investment properties is a better bet when you are young and don’t have children.

Big Pent-up Demand For Multifamily Investments

With increasing anticipation of a strong recovery in 2021 thanks to a bevy of upcoming vaccines, it’s worth getting smart on the best multifamily investment opportunities post-pandemic. The value of cash flow has gone way up because interest rates have come way down. Meanwhile, mortgage rates will continue to be very accommodative.

For evidence of pent-up demand, look no further than Airbnb’s IPO on December 10. The company was valued at $49 billion at IPO, higher than the original valuation range offering. The shares then proceeded to double in the first day of trading.

Remember, hospitality is still largely shut down. Airbnb bookings are way down. Yet, Airbnb is now worth about $100 billion after raising capital in April 2020 at a valuation of only $18 billion.

The share price performance signifies the demand for travel, hospitality, and real estate will come roaring back by 2H2021. Therefore, you want to get long real estate before this happens. Thankfully, real estate valuations move at a much slower pace than stock valuations. Hence, the current opportunity.

I’ve invited CrowdStreet, my favorite real estate crowdfunding platform for accredited investors and Financial Samurai sponsor, to educate us on three types of multifamily properties they think are the most promising. CrowdStreet is free to sign up and explore.

So you’re looking for a big expensive house to upgrade your life. Perhaps the months of lockdowns during the pandemic is making you want to live it up a little. I get it! Owning a larger, nicer house will make living through rolling lockdowns much more bearable. Further, it might appreciate faster given the demand for larger single family homes is going up.

In fact, my wife and I bought a big expensive house one month into lockdown in April 2020. We figured, if we’re going to stay home so much longer, we might as well have a nicer house! Looking back, I don’t regret the decision on bit. The intrinsic value of real estate has gone way up because we’re all spending much more time at home.

However, I want to provide a warning that a big expensive house can ruin your life and derail you on your path to financial freedom if you don’t carefully do the math. Let me share one of my experiences almost buying an expensive house back in 2018 and the numbers.

The Desire For A Big Expensive House Emerges

As a dad, I’d like my parents and in-laws to come visit more, which is why it’d be nice to have a ground floor level portion of the house dedicated just to them. This would make it more comfortable for all of us.

Given I write from home, it’d be nice to have a house large enough so that I can’t hear my boy squealing with joy or crying in frustration. Trying to create while hearing him is one of my toughest challenges because once I hear him, I just want to drop everything and go to him.

Finally, I have some FOMO that if I don’t buy this house now in one of the best neighborhoods in San Francisco, I might never be able to get in. This is my ego talking more than anything else. 

Due to the pandemic, it’s good to think about real estate investing by coronavirus positivity rates. The higher the coronavirus positivity rate, the more fearful capital will be. Economic recovery will likely be slower and outside capital will likely stay away.

As a whole, American real estate is some of the cheapest developed country real estate in the world. When you add on how much money you can make in America thanks to the proliferation of world-class companies, American real estate becomes an even better bargain.

Below is The Economist’s real house price index. Notice how cheap the United States is versus New Zealand, Australia, Britain, France, Ireland, Canada, and Spain.

The realization of how cheap American real estate is on a global scale should make you want to buy as much real estate as possible if you are an American. After all, before the pandemic began, international investors were gobbling up American real estate for this reason.

The last thing you want is foreigners profiting off your land and pricing you out. Instead, you want to buy property first and then get rich as foreigners bid up property prices. The pandemic has helped keep foreigners at bay, for now.

Unlike stocks, there’s no easy way to ascertain the exact value of your current property or the property you plan to purchase. As a multi-property owner I’m glad there aren’t any ticker symbols jumping around every weekday because they are just a distraction. I want to share how to correctly value and analyze investment property.

Getting wealthy in real estate is all about buying, maintaining, and holding for as long as possible to build wealth when it comes to real estate. With stocks, plenty of people got scared and sold at the bottom in 2009 and again in March 2020. With real estate, it’s much easier to hold a real asset for the long term.

Real estate currently makes up around 40% of my net worth where it will stay for the foreseeable future as I focus on entrepreneurial endeavors. Since 1999, when I worked in finance, I have invested the majority of my income in real estate to diversify away from equities. And due to this long history, real estate has become my favorite asset class to build wealth.

In this article I’ll approach valuing property from an investor’s stand point. We’ll go through some big picture concepts as well as use a real life example to see whether we are making a good or bad investment.

Despite reported rents going down anywhere from 15% for 2-bedrooms to 30% for studios in San Francisco, San Francisco real estate prices keep going up in 2020. The question is, how come?

As a resident of San Francisco since 2001, a homeowner since 2003, a landlord since 2005, and a personal finance blogger since 2009, I’ll share with you my perspective on why San Francisco real estate prices keep going up during the pandemic.

Big media like Bloomberg, SF Chronicle, and more love to focus on the negatives. Perpetually negative local blogs like SocketSite and Wolf Street, who missed the big run up since 2011-2012 also like to focus on the negatives because they’re hoping they’ll finally be right. However, I’m here to tell you a more balanced point of view.

Yes, I’m long San Francisco real estate. But I also sold a single family home in The Marina district for $2.74 million back in 2017. Therefore, I feel I have a balanced perspective on the market. I’m also a landlord who recently spent a month interviewing a dozen prospective tenants.

San Francisco real estate prices keep going up, as you can see in the chart below. Let’s explore why.