Buying my first property

23 Replies

Hey BP,

My wife and I are looking at buying our first multi family soon, either a duplex or fourplex and I’m not sure when the right time to pull the trigger is. I am not sure how much I need to have saved up in reserves, and how much to have as an emergency fund. I am going to start with being an owner occupant then branch out from there. Any advice would help, even if it has nothing to do with this question specifically. Thanks!

Hey Joe welcome to BP...great site for information on REI

The beginner's guide and the podcast are great places to get started, ask questions and it will sure to get a reply.

Set up a time frame for learning and then start investing when you feel comfortable.

Good luck and see you around the site!!

Hi Joe and congrats on your decision to pull the trigger. Don't wait for the right time to pull the trigger, wait for the right property. If you try to time things perfectly you'll never buy a property.

As for reserves, most lenders will want to see at least 6 months of reserves to cover the mortgage, taxes and insurance at a minimum. Depending on the property you may want more than that for unexpected repairs. If it is an older property that needs to be updated then there may be more chance for something to come up. If the property is new or has already had some updates then those chances may go down some. It's also a matter of personal comfort and risk. How much would you need to feel comfortable if the other units were vacant for 6 months?

There is no hard and fast rule so use your best judgement.

Best of luck!


Hi Joe,

Welcome to BP.

I agree with Eric, Now is the right time!

For the reserves, find a local bank and build your relationship. I have a local bank whom I can walk in and shake hands with the president and VP. Share your business plans with them and they will back you up. Another option, depends on the location there are always hard money lenders.

Best advice again would be to have atleast 6 months of reserves saved up, it is also helpful to show the local bank and/or hard money lenders that you can afford to make payments on the loan without any cashflow.

Happy investing and wish you best of luck!

Hello Joe,

I am in the same position as you. My wife and I are looking at putting offers on a first property in the coming weeks. I have spoken to friends that have RE investments, and listened and learned a lot from this site. All I can say is this is an amazing venue to talk to people that are for real, and really doing REI. Most of my friends and family just don't get it. Good luck! The St. Louis area seems to be a great area to invest, which means there is probably competition for that elusive "killer deal".

@Eric Black @Sid Siddiqui Thanks for the info. I am looking at saving reserves now but it may be about a year before I have the money saved up. What did you guys do before you bought your first property? Looking for practical steps here. thanks

Do little bit of low budget marketing i.e. (door knocking, bandit signs etc), find a deal and wholesale, raise capital $$ via the assignment fee. I use to charge between $2000, $5000 or up to $10,000 on assignments depends on how big is the deal and what investors I'm working with.

Joe, Congrats on finding a wife who will stand by your side as you attempt to buy your first Fourplex. I'm sure you will put that " good times and the bad" part to the test. Be sure to set aside time for you two to communicate about the project. Its hard to beat the kind of amazing team a good couple can be. I'm excited to hear how this works out.

Play to the kings.

@Scott McGill Thanks man, It sure does help to have her on board. @Sid Siddiqui So basically find people who are selling, then find people who are buying and make a fee until I build reserves/capital to start?

@Joe Spence yes, exactly.. this way you will be learning very critical skill to have in this business which is negotiation with sellers.

A quick tip, finding buyers is easy once you have a deal under contract

Hi @Joe Spence

St Louis and Kansas City offer some awesome undervalued properties.

I am actually also looking at buying a multifamily dwelling in Ohio to live in and rent out the other units.

The numbers on the Midwest should work quite well for anyone looking at purchasing in this manner.

Thanks and have a great day.

Welcome to BP Joe,

I was in your shoes less than a year ago and am closing on my first deal tomorrow.

The best thing I think you can do while accumulating your reserves is build your knowledge. In the limited time I've been involved in Real Estate, I've realize this is not an industry that is forgiving to the uneducated.

I learned a lot by attending local real estate investor events, working with agents to see properties, and reading just about anything I could find on real estate. The BP Learn tab is a great starting point.

I also agree with @Sid Siddiqui regarding wholesaling. Not only will you learn how to negotiate, but you will learn how to evaluate a deal and sift through the garbage that is out there.

Also, as a side note, if you have a 401k at your job, you can use a certain percentage of that money for your reserves.

Good luck and don't give up!


Hi joe,

Education is deffinitely the first step. I personally would advise you to look into whats called creative investing. It boils down to coming up against almost any deal and find a way to make it work for all parties involved. Once you have even a basic understanding of that then get into negociations, over coming objections. wholesaling is a great way to get started but if you can't overcome the objections it can be very difficult to get anywhere. Wholesaling is basically this, Get the property under contract for a term usually 30 days. and find a buyer before those terms come to an end. Keep your earnast money as low as possible. I have personally tied many deals down for ten dollars but it may take more. It's a very simple transaction. You should strive to become a transaction specilist, if that's a good term.

I just acquired three properties that I tied up for a total of $100 two weeks ago and wholesaled one that paid for all three in 8 days. It's a rare transaction but they are out there. One of the people that influenced me when I got started said, "What most people think of as a once in a lifetime deal comes along about once week when you marketing is consistant".

A good rule to stick with is the 70% rule. find the property determine the after repaired value (ARV) take 30% off of that, estimate the repairs reduce your price again for the repairs and then leave at least 3,000 for surprises and there will almost always be some. Example; $100,000 house minus thirty thousand. that needs $15,000 in repairs making your maximum allowable offer (MAO) $55,000 Now with that said my offer would probably start at about $46,000 to $48,000 looking to max out at $52,000 but if my estimates are good $55,000 is fine for me.

Don't go into analysis paralysis. If you find a deal that makes good sense make the offer. You are dead in the water until you make offers. Then the fun begins.

Get up, get started, take action. Action is the key.


Pull the trigger now.

I am not saying buy, but what you are really looking for is rental history. If you find a quad that has great rental history, and minimal deferred maintenance, then you will be pretty safe.

As a rule of thumb though, and what some banks may require, is a 3-6 month reserve.

In your first MF, they do not count rental income as a source of income until you have 6 months experiance as a landlord.

@Joe Spence there is both an exact and subjective answer to your question.

The exact answer to how much you should have in reserves is however much your lender requires you to have. I'd talk to a lender about what you're looking to buy and they will give you their underwriting requirements. I imagine they'll tell you it will be 3 -6 months reserves.

The subjective answer is whatever you feel comfortable having in your account so that you can rest well at night. I personally like to have 6 months reserves to cover the mortgage and expenses but everyone is different.

@Patrick Henderson I like that " transaction specialist" , thanks for the great advice.

@Joe Fairless

I would lean towards building smart and having the reserves there. I value my rest at night, great info thanks man.

@Clinton Holmes Congrats on your deal, I hope all turns out well. Thanks for your advice.

@Michael Moikeha do you have a spreadsheet you run the numbers on? or does anyone have one for that matter? If I don't have to reinvent the wheel that would be great. Thank you again!

I know we're talking reserves specifically for an investment property, but also think about reserves for your personal expenses. If you're saving from $0 now (you haven't said this, but I've seen people say, "I started with $100 to my name and bought a property!") and you get 6 months of mortgage & repairs saved up for a REI, buy a property, but lose your job, then that reserve is going to disappear in a hurry. Most financial advice would say have 3-6 months of your salary saved up first before thinking about making any investments that you could lose. You might say, "No kidding Sherlock!", but just thought I'd throw that out there! haha

@Joe Spence

Congratulations on your decision to buy. The one piece of advice that I wish I had when I had started was to take a look at what the market is giving you for cap rates in different types of properties and narrow down your focus area from there. What I mean is, as a buy and hold investor, if you're primarily interested in cash flow, it's entirely possible that because of your specific market's dynamics, single family might have higher cap rates than multi-family. The corollary to this is, just because you narrowed down your focus area, doesn't mean you should neglect glaring opportunities outside of your focus area. As an example, I was almost exclusively looking at 8-10% CoC , REO and HUD SFRs in suburban B / B+ neighborhoods. One day, I completely randomly toss in an offer on a couple of rural duplexes that have been on the market for a while and get bid at 35% CoC. This never would have happened had I rigidly stuck to my buying criteria that I set when I knew absolutely nothing about REI.

Happy hunting.

If you can afford it and you are going to live there, I would go with a 3 or 4 unit place. Then going forward if you want to, you can live in your unit and renovate one at a time for higher rent if your area demands it and therefore increase your equity to leverage for future deals while never changing the amount mortgaged!

@Max Householder That's great advice, that's our plan to have at least 3-6 months reserves of our salary apart from the reserve for investment property.

@Riley F. Thanks man, ill defiantly keep an open eye out for a deal even if its out of my immediate plan.

@Brock Siebert I like the sound of that. thanks

congrats Joe, keep us posted! Excited to hear how everything works out for you! :)

This thread popped up nine months later. @Joe Spence, any progress to report? If not, why not?

Years ago I worked out that I made a mistake not buying a property until I found one that I was prepared to live in ie. I should first have invested based purely on investment value, not personal living preference. So Joe, if you and your wife have hummed and hawed for the last nine months without buying, what is REALLY holding you back? Just asking. Cheers...

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Hi Joe,

This is an exciting time for you, I wish you the best.

Here are a few suggestions I wish I had when I owned my first triplex.  They will save you a LOT of money.  If at all possible, negotiate these in your lease / purchase:

1) Make the tenants responsible for utilities.  Even if they have a shared meter, tell them you will split it evenly and divide it.  Otherwise, electricity and water go through the roof.

2) Write in the lease that anything below $50 is the responsibility of the tenant.  This will save you calls to come change a light bulb.

3) Negotiate home buyers insurance as part of your purchase.  They cover things like appliances breaking, etc.  They give you a 1-800# to call for issues such as these.  So, write in your lease that anything over $50 (non-emergency) they are to call the 1-800# for service.  So then either way, over $50 and under $50 (non-emergency) you are covered.

4) To the greatest extent possible, try and take variability out of your expenses.  Get longer-term contracts for maintenance so you don't get surprised monthly, try to find out from the city if are there any planned easements, etc. in advance.  The more you know and  the more you know it in advance, you can adjust into your rent prices (market willing).

I hope this helps and good luck with your purchase!


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