Updated 16 days ago on . Most recent reply
Financing first investment property
How should my first investment property be financed? Should I use my own money for purchasing, closing costs? Equity loans? What is recommended for first investment property?
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Depends a lot on whether you're going to live in the property or buy it strictly as an investment. If you can house hack a duplex or triplex with FHA, that's the lowest barrier to entry right now, 3.5% down and FHA rates are running in the high 5s as of this week. You'd live in one unit and rent the others. Way less cash out of pocket than a straight investment property purchase.
If you're buying it as a pure rental from day one, you're looking at conventional with 20-25% down and rates in the mid to high 6s for investment property. That's real money on a Philadelphia property. You'll also need reserves, usually 6 months of payments sitting in the bank depending on the lender.
Your own cash for the down payment and closing costs is the simplest path for a first deal. HELOCs work if you own a primary with equity, but you're adding another payment and that factors into your debt to income. I'd figure out the purchase price range first, then work backwards to see what you actually need liquid. A lot of first time investors get surprised by how much closing costs add on top of the down payment.