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)?

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.

Khalid Bryan · Answer

I love that you are thinking through your options and making sure you are making the smartest financial move. You are in a solid position with low expenses, a strong savings cushion, and a pending income increase, but I think you have an even better opportunity here.

Before you commit to this townhouse, I would highly recommend talking to a lender and a real estate advisor about purchasing a multifamily property instead. Since you are planning to use a lot of cash anyway, you may be able to leverage an FHA loan and put down just 3.5 percent on a duplex, triplex, or fourplex, as long as you live in one of the units.

The advantage of this strategy is that the rental income from the other units gets added to your income, which means you could qualify for a larger loan and end up with a bigger, income-producing asset. Instead of putting all your cash into a single property, you could use a small down payment, keep more liquidity, and have your tenants cover a good portion of your mortgage.

If you go this route, the best setup would be to live in the smallest unit and rent out the larger ones so you maximize rental income. After a year or so, you could then qualify for another FHA or conventional loan on your next property while keeping the first one as a long-term investment.

If you are thinking about using the BRRRR method for your first deal, I would be cautious about taking on a property that needs too much work or has a lot of deferred maintenance. The best first investment is something nice, clean, and livable but still has room for improvement. A great target is a property that was last renovated between 2012 and 2019, meaning it is still in decent shape but could be upgraded to 2025 standards to maximize rent and value.

You can also look at properties with long-term tenants who have been paying below-market rents. If the landlord has not raised rents in years, you could increase rents gradually as leases expire or make upgrades to justify higher rents. It is all about adding value and improving cash-on-cash returns.

It is also worth checking market trends to see the year-over-year growth rate and run a pro forma to project how much appreciation and rental income increases you might see over time.

Your savings and financial discipline put you in a great spot, and I would just encourage you to explore how you can make your money work harder for you instead of locking it all into one property. The right real estate team can help you find the best opportunities and structure the deal in a way that sets you up for long-term success. And remember, commissions are always negotiable, so you can find an agent who understands your goals and works with you on terms that fit your needs.

Hope this helps, and I would love to hear what you decide.

Disclaimer: I am a licensed real estate broker associate in Florida, but I am not an attorney, CPA, or financial advisor. The information shared is based on my experience and industry knowledge and should not be considered legal, tax, or financial advice. Always consult with a qualified professional before making any real estate investment decisions.

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.

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.

Should I try to buy with a loan or Wait?

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