Can't afford to buy a home near my business- buy investment instead?

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Hi all,

Would love some advice: I cannot qualify for a home loan to purchase a home within 50 + miles of where my business is located, unless I'm willing to move the family into a crime filled neighborhood. Unfortunately, I started my business 10 years ago here without thinking about the reality that homes are extremely expensive here and my humble business doesn't bring in the kind of income required to buy a house in one of the "safe" neighborhoods within reasonable daily driving distance to my work.

So, my question is: should I instead purchase a property anywhere from 100 to 500 miles away from my work, at a very reasonable price, and keep renting a house/apartment for my family near my business until I can retire, or create some other online business, then move away from here into the investment property instead? I pay about $2500 a month in rent here, but I can qualify for a mortgage for a nice home way out of this area for a decent monthly payment of around $500-$700 per month. I have the cash to make that monthly mortgage payment every month, and I'm feeling I want to own something, and maybe I would even rent the vacation house out through Airbnb or something, and make some income to help pay the mortgage sometimes.

Do you think this is a good idea?  Would love to hear your pro's and Con's about it. Thanks!

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I would say to buy an investment home if you want to be a landlord and it's a good investment, not to maybe move into decades from now. There's a pretty good chance you'll change your mind.

Without knowing the rest of your financial picture (emergency fund, savings/investments, income, expenses, other debt, etc), it will be hard to tell you whether this is a good idea or not.

skatingmommy said:   ...create some other online business...
Is your existing business online or is it a B&M? If online, why can't you just move it to where you want to live?

skatingmommy said:    I pay about $2500 a month in rent here, but I can qualify for a mortgage for a nice home way out of this area for a decent monthly payment of around $500-$700 per month. 
  If you pay $2500 a month rent why can you only qualify for a $500-$700 per month mortgage? 

My business is in person where I live. It's not online at all, at this point. I'm a clinical psychologist, and it's taken YEARS to build my practice here. I'm guessing it would take at least 2 years to start all over again in a new more affordable area- and I don't have enough savings to live off of for 2 years while I'm waiting to build it up in a new area where I can qualify for a house. I've thought of applying for jobs in a new area, but I've worked for agencies and hospitals in the past in my field and it is really painful work. It's too stressful for me to see patients every single hour of the day and potentially see the most troubling of cases since they wouldn't be private pay. Honestly, I'd rather work at the mall than work for an agency or hospital ever again.

I've been told I only qualify for around $150k since my credit isn't great- I'm cleaning it up and rebuilding it right now. Also, I've been told that small business owners have a difficult time qualifying for big loans since we're more risky applicants, and my net income looks pretty low after all the business right-off's. I can put $75k towards the down payment of a $100-$175k house, which would make the payments really nice and low. That's why I'm wondering if I should at least just buy something I know I have waiting for me once I can get a business going to see clients over the phone and online someday, rather than just staying here forever paying these high rents (plus another $1000 per month for my office) and never having anything of my own to show for it at the end of the day.

In short, no, this is not a good idea. Why would you want to bother with a second home? Save the money you have (do you max out all your tax deferred retirement options?) and buy something after you move. You would spend a lot of money on mortgage, taxes, utilities, upkeep of the home for maybe a couple of weekends you are there. Things tend to change in life so who knows if you even want to move there anymore in a couple years.
Renting is not a bad thing, just make sure you safe enough money to make up for not owning a house when you retire. You can then decide if you want to continue renting or buy. In general real estate barely outpaces inflation (there are obviously exceptions but they work both ways) so there is no rush to own anything. 

Based on what you have said, I would not be a landlord. (I have been one. With a few bad experiences, I was lucky, but the surprises killed me financially.). There are always surprises which I do not see you able to handle financially. Keep saving up for a down payments and your credit should take care of itself over time. What would you do when the tenant fails to pay rent for a few months or trashes the place. I recommend that you enjoy your family vs the time being a landlord can take.

Focus on your specialty, it has taken you years to get the degree and build up a solid clientele. Getting more patients or increasing their fees will have a much more powerful impact on your profit then dealing with a house 500 miles away.

Tons of downside and very little upside. I'm guessing you are afraid of "missing out" on the RE run up. Don't.

Try the NYT buy vs rent calculator. If you can afford to rent a $2500/month place but can't buy it- I suspect the calculator will agree with you.

50 miles is not very far. I know plenty of people who commute that distance and more into my office in the northern Austin burbs. You seem to have flexible hours, if you begin your day at 11am and work till 7pm you can avoid rush hour and provide better hours to any of your clients who might work. You might even be able to take a day or two off and have longer hours on the working days. Perhaps work 2-3 days a week in the big metro, and open an satellite office in your new town the other days and then gradually shift out to the cheaper location.

If your credit is not great then perhaps you should NOT buy anywhere!

Even if you "qualify" - you will likely pay a very high interest rate or some other cost.

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