Should I try to buy with a loan or Wait?

Question

Hello!

I’m in my 40s and live in South Florida with my father and his wife. I own no properties. My expenses are very low. Currently, I work a part-time W-2 job that pays me about 17K/year. This is supposed to increase significantly later this year as I transition to full-time in the same position, but my employer won’t give me a date for this yet. My credit score is over 650 and I have about $200K in savings. I also have about 12K in debt on a 0% credit card offer that won’t expire until next year (part of this is an unrelated business debt that I think is a write-off).

I would like to move out and live on my own again. And so I have been hunting for a property within my budget, close to 1000 square feet, with a low (or no) HOA, in my area for years to no avail. Recently, I found a listing for a 920 square feet townhouse built in 2006 with 2 Bed/2 Full Bath and an HOA of about $230/month. Properties like these are rare, in my experience searching.

The sellers are investors and are asking for $240K and claim they won’t budge. I saw the property and it looks good to me. It is also near to where my dad lives, which is important to me. They claim it is being rented for $1900/month.

Now, I have thought about offering $200K, which would leave me with no money (I am factoring in closing costs), but then renting it out for a year or so to make up for this. The income from my W-2 job should cover my minimal personal monthly expenses. After this, I would move in and then, with a fully paid property use any extra cash savings over time to purchase an investment property (or I could use a HELOC, but I prefer to keep my home paid off) with a mortgage.

Since they claim they won’t budge on the price, I am considering getting an investment or personal loan for say $40-$60K instead, maybe for a 5-10 year term. To add another obstacle, the sellers say that the previous potential buyer’s financing fell through and that they want all cash. But I’m thinking they’d consider a mostly-cash offer like mine and that this would make it less likely for the financing to fall through. I’ve asked my real estate agent to check up on the HOA for me, but she is still waiting on the seller for some details. She did tell me it has no real reserves.

Does any of this make sense, or am I allowing my desire to move on with my life color my judgment and potentially get me into a bad deal? Should I try to execute or should I sit this one out, keep increasing my income and savings and try again in, say, six months, hoping another lower-priced property will pop up?

Thank you for reading!

Mat Garcia · Answer

@Mike Fingleton: My Real Estate Agent just sent me a screenshot of a chat with the HOA rep where she said they "were" replacing the roofs- that is- it was very obviously put in past tense, not in present tense. They did confirm that there are no special assessments, but something funny seems to be going on there. Not a dealbreaker, but something my real estate agent and I need to dig in deeper to.

As for distance: The property is near where I live, so that's not an issue at all.

And yes, the debt does weigh on me even though it is currently not costing me anything. I'd like to pay it off, but right now I prefer to have it work for me (I've got my savings invested in mutual funds and some stocks) until I have to pay it off.

I'm definitely going to try to negotiate the price down.

@Jaren Woeppel: Good point on the cost of a personal loan vs. a mortgage. I will have to keep that in mind.

As for house hacking, I don't see a lot of duplex/triplex/etc. here at a lower price point. I was cinsidering renting out the second room of the townhouse, but it's a small place and I'd have to share the common areas, and I'm not sure how comfortable I'd be with that now. I have rented together with friends before, but that was years ago when I was a bit younger.

@Raymond J. Rodrigues: I know it's a lot to put on one property. My thinking is also about having the security and peace of mine of having one's home paid off, although I would not hesitate to have a loan/mortgage on an investment property.

@Khalid Bryan: It's certainly an idea. I just don't see a lot of duplex/triplex/fourplexes in my searches, but I will keep an eye out for them.

And my thinking has been along the same lines: That I can't get a property that is destroyed and needs a lot of repair, but one that needs some normal maintanance and upgrades is doable. I know repairs can start costing more than the initial estiamte, especially if one is just starting out.

@Theresa Harris: Thank you for the advice. I'm not fond of HOAs myself, but there's not a lot to choose from at the low-end. Maybe waiting is a better option.

As far as saving $200K, I wish I could take the credit. Most of it was inherited (which is a tragic story I will leave for another day). I have simply invested the money, left it alone and added to it a little bit every month. And I have been lucky so far to have been able to make it grow in the stock market, but I would like to shift it into either a real estate investment or my home property soon.

@Obed Calixte: I am looking into loan/mortgage options this week, although I don't expect much given my low income right now.

As I understand it, the bank pulled out of funding the buyer because of the issue with no reserves and maybe something else they didn't like about the property (I'm not sure of the details).

Thank you so much for all the replies!

Obed Calixte · Answer

To drop all or most of your funds into a primary is not a great use. You've done a great job in saving, don't risk it all on one play.

On the financing side- find a reputable lender to get pre-approved with based on your current financial standing. Low/no doc asset based lending options are out there. That'll allow you a clearer picture of upfront costs and monthly payments.

On the property side - what type of property are you currently looking at? Did the buyer financing fall through due to the buyer or the property (ie. condition, insufficient reserves, owner/renter ratio, etc)?

Santiago Gonzalez · Answer

Jaren's house-hack idea is worth a serious look, especially with your numbers. With $200K in savings, you could put 3.5% down FHA on a duplex or triplex in several Miami-Dade zones where the rental income from the other unit(s) would cover most or all of your mortgage — something that townhouse with a $230/mo HOA will never do for you.

A couple of areas to run numbers on: Westchester / Tamiami has duplexes in the $180–250K/unit range, sits in FEMA Zone X (no flood risk), insurance around $1,100/unit, and average rents of $1,800 with only 4% vacancy. It's an established community near FIU with steady demand. Kendall / The Crossings is another option — $240–310K/unit, rents around $2,200, low crime (A- grade), good schools (A-), also no flood risk. Both areas have walk scores in the 30–40 range, so car-dependent, but the fundamentals are solid.

Quick math on a $400K duplex at 3.5% FHA: you're out of pocket roughly $14K plus closing costs, you live in one side, and the other unit at $1,800/mo covers a big chunk of your PITI. You'd still have $180K+ in reserves — a much stronger position than sinking all $200K cash into a single townhouse with no income potential. And when your W-2 income goes full-time, your DTI improves and you can refi or scale from there.

Mat Garcia · Answer

So (almost) a year update: My low-paying job never followed through with the full time. I have been applying to other jobs, but nothing yet. Frankly, I am close to quitting even without anything else lined up. The pay is so low it almost doesn't make a difference and it's not as if I'll become homeless or go hungry. I don't spend a lot anyway and I have an emergency fund in case I do have an unexpected expense (car repair, etc.). I figure I can concentrate on doing something on my own or even just on applying to other jobs with the extra time.

I haven't cashed out my stocks yet, but I figure I would have at least $250K in cash after taxes if I liquidated now. I want to get into action mode, but I'm not sure what to do. A big part of my hesitation is having to move hours away from my dad, who is in good health but surely not getting any younger. And yes, I have a stash of cash- But that doesn't go very far down here and I keep wondering how to pay for things in the long-run without a W-2 job income.

I saw a promising foreclosed house in South Florida, but it's only got one bathroom and now it says under contract. The properties I mentioned in previous posts never sold- And the investors who said they wouldn't budge are now asking $20K less than before. But I don't know if I want anything in an HOA anymore, to be honest.

I hope this is coherent enough. Would appreciate some guidance!

Scott Wolf · Answer

Mat, if you're looking to move out, investor loans are ruled out, so you need to focus on getting a higher paying job if that's the goal. Perhaps something real estate related (LO assistant, RE Office assistant, etc.) if this is where you're trying to focus.

You can also look into USDA loans, which have 0% down options and can be used for small MF so you can have tenants pay for your living expenses.

Mat Garcia · Answer

I went to my local credit union and the rep ran my numbers... But ultimately concluded that my current low income would probably not qualify me for the loan, even though it would be a very small mortgage. I didn't go through with the formal application because it would be a credit hit. So, I may still make an offer on the property, but only based on what I have and nothing else. She did say that once I had the full time position I would almost certainly qualify.

Mike Fingleton · Answer

Hey Mat,

I completely understand where you’re coming from, and I think you're asking the right questions here. First off, kudos for the careful thought you're putting into this decision! The last thing anyone wants is to jump into something that could put them in a tough spot, and you're showing a lot of restraint, which is a big plus.

Let me tell you a little story from my early years in real estate, which might give you a clearer picture. I was once in a similar situation low cash flow, lots of desire to get out of my parent's place, and the temptation to jump on a deal that seemed too good to pass up. I ended up stretching myself thinner than I should’ve, not accounting for some unexpected repairs and the challenges of managing a rental property with little experience. It wasn’t the worst outcome, but it definitely taught me to be cautious and to make sure I wasn't taking on more risk than I could comfortably handle.

In your case, you’ve got some solid pros here, especially with your savings cushion. But, I’d caution against overextending yourself, especially with the debt you’ve mentioned. While it's true that you're not paying any interest on that credit card debt at the moment, it’s still something to factor into your overall financial health. On top of that, if the HOA has no reserves, you might be looking at some unexpected fees down the road, and the previous buyer’s financing falling through might hint at deeper issues with the property.

The idea of buying the place, renting it out, and then moving in later could work, but you should ask yourself: do you feel confident managing a rental property from a distance, especially with your current income situation? As for taking out an additional loan on top of the purchase price, that’s another layer of risk that could come back to bite you down the line. Real estate can be a fantastic wealth-building tool, but the first property should be more about stability and long-term gains rather than short-term sacrifices.

Here’s what I would suggest: If you're really set on making a move now, maybe find a way to negotiate that price down..maybe a little under $230K, even if they won’t budge much. Otherwise, I’d consider sitting tight and building up even more reserves before diving into such a big commitment. I know the market’s moving, but patience is a virtue in real estate. With your current situation, I'd err on the side of caution, and I think you’ll be in a much stronger position in six months or a year.

But here's a question for you: Have you considered other areas of South Florida where you might find a better deal, or perhaps even something that's a little less on your plate in terms of potential headaches?

Let’s keep the conversation going, there are a lot of ways to approach this.

Raymond J. Rodrigues · Answer

@Mat Garcia I wouldn't sink that much cash into the property if at all possible. It's good to keep reserves on hand. There are no income verification primary residence loans available that require 20-25% down payment.

Theresa Harris · Answer

If you've been able to save $200K while making $17K/yr, you are doing a great job saving.

I'd be wary of a condo with almost no real reserves. I'd try to look for a single family home in an area with no HOA if possible. Meanwhile talk to a bank and find out if you'd qualify for a mortgage and if so, how much.

Jaren Woeppel · Answer

Hey, @Mat Garcia

A lot of great questions in there. Couple of quick thoughts that may help.
-Getting into a situation where you’re borrowing additional funds to close, which if it is an unsecured personal loan, will have an astronomical interest rate compared to borrowing a secured debt like a mortgage. So I would try to avoid that kind of debt, and try to only get low interest debt if you are needing to borrow.
-Have you thought about potentially buying a house-hack property? Buying a house for you to live in, that also generates income. For example, buying a duplex and living in one side and renting out the other. There are may other ways to do it but the point being, you are not only buying a primary residence for you to live, but it also is an investment because it is bringing in money for you every month.

Should I try to buy with a loan or Wait?

Should I try to buy with a loan or Wait?

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