Advice on second property
Hello, I recently just bought my first property being a 4bedroom/2bath home. Home has an additional 1 bedroom/1bath apartment downstairs with its own separate outdoor entrance. We are currently living in the top floor with the 4 bedrooms while we have a tenant living in the apartment. Our plan is to eventually rent out both units and buy another multifamily property. The main concern I have is saving enough money to buy another property because I’m assuming it will require 20% down considering it will be our second property. My fiancée both have good paying jobs but it might take longer than we want to save enough money to buy another property. Does anyone have any advice or suggestions?
Double check this with your bank, but I think you can buy another property for under 20%, even though it's a second property, if you buy it as owner occupied. Then after you live in it for the required 1 year you can move out and rent it. You could even do FHA for this scenario; very low down, but of course higher mortgage. Why are you living in the 4 bedroom unit? Would it be worth it to live in the apartment downstairs to get more rental income? I lived in an Airstream trailer with no bathroom for $300/month for a year to save $; it sucked, but it helped me get what I wanted.
If you have relatives with $, you could look into that for a down loan. Sometimes, these things just take time; if you stretch the money too much you could end up in a bad situation.
Quote from @Manco Snead:
Double check this with your bank, but I think you can buy another property for under 20%, even though it's a second property, if you buy it as owner occupied. Then after you live in it for the required 1 year you can move out and rent it. You could even do FHA for this scenario; very low down, but of course higher mortgage. Why are you living in the 4 bedroom unit? Would it be worth it to live in the apartment downstairs to get more rental income? I lived in an Airstream trailer with no bathroom for $300/month for a year to save $; it sucked, but it helped me get what I wanted.
If you have relatives with $, you could look into that for a down loan. Sometimes, these things just take time; if you stretch the money too much you could end up in a bad situation.
I appreciate the advice. We will definitely be living in the next property we purchase so taking advantage of the FHA might be a good idea. I actually forgot to mention we are also renting out the bedrooms in the section we are living.
I would definitely check with your bank and multiple banks. I am currently preapproved for a second home using 5% down!
Hi Edward,
I am in the same boat with searching for a second property. My understanding through my lender is that if its 4 units or less, you can put 5% down. Definitely check on that and good luck!
@Edward James smith If you plan on occupying the next property and have lived in the current property for at least 1 year, you can absolutely utilize 5%, 10% down conventional loans. Even FHA loans.
If you have signed leases, you can even use 75% of the lease amount toward your income on the next purchase. I mention this because you'll need to have favorable debt-to-income ratios if you want to finance 2 properties (especially with lower down payments as the monthly payment will be higher). Using the rental income to counter the monthly payment of the 1st property is a great way to do this.
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I would sell it and just move on to a better property. Anything good in Spokane anymore is way outside the FHA conforming loan limits so you will be stuck paying that high 10 - 20 % down payment. None of the other commenters have mentioned that. Everyone on here wants you to believe that little or no cash down and scaling as fast as you can is the ultimate and only way to succeed at real estate...not true. Buy quality. Wait for something great to come your way. Save up your cash and be a bigger fish in that small pond. Nice work on the bedroom house hacking. Good luck!