Wait for $ or Jump right in?

6 Replies

Hi!

I'm new to this (of course) and I'm trying to determine just exactly how I want to break into the market. Basically, I don't know what my 'niche' is yet.  I've read some about multifamily properties, some about townhomes and some about mobile homes.

I don't make a lot of money at my day job, but I live frugally and currently have about 3k saved up - very close to being able to get an FHA 3.5% down loan on ~100k worth of townhome - I would get 3bed/2ba and rent the extra bedrooms out.

I could also save for ~6-8 months and have enough for 3.5% down on a multifamily property in my area, running about 250-400k each. However, this won't cash flow unless I'm also paying like a renter and accumulate roommates (which I plan to do anyways, no matter the case, but... What is best?). I would most prefer this because the equity built would skyrocket my initial wealth and give me tons of leverage for future endeavors, but I'm not sure anyone would take the chance on me (lending wise). 

Or, I could put 10% down on a mobile home. Are these even a good investment? But they're only 35k! And, they're for sale all the time. Hmm..

Basically, those are my three options, and I'm not sure exactly what I want or need. I would most prefer a multifamily property, but that requires waiting, which I hate - and I want to minimize wasted time! But I also don't know if I can actually qualify for the loan on multifamily (or cover the closing costs, reserve funds and initial repairs etc)... But I know I can on a townhouse.

I could really use some advice! Can anyone point me in the right direction?
Thanks! 
Kayla

I am also new to the real estate investment and have looked at what will be best for my situation. I am glad you are feeling your way around and looking for some advise and gaining from others experiences. When I was looking for an investment property earlier this year I was given a rude awakening by my credit union. When I told them it was going to be an investment property until my wife returned to the location they changed all the rules.

1) I no longer qualified for the low interest rate.

2) I had to come up with 25% down. 

3) I had to show them how much I would have based on the rental market in the area.

4) I had to produce a letter stating how much the current rental rate was in my area and what the potential profit would be. 

So ask a lot a questions and be careful with what you buy since it changes the game plan from the beginning.

Good Luck

@Ernesto Pena  It sounds like they took that qualification away because you won't be owner occupying. If you were able to rent out your current dwelling and move into the investment property you're going to buy, that would probably work out fine... 

I'm actually counting on providing average rents and projected income to allow me to purchase a multifamily property at all - I make far too little at my day job to qualify by that alone.

I definitely agree though - my first purchase will set the theme for my future endeavors. Thanks for the well wishes!

@Joe Fairless  Thanks for the welcome!

That's actually my primary concern. I don't have enough funds to cover down payment, closing cost, AND reserve funds. Not that I don't understand the logic behind having reserve funds, they're more than necessary! So I am considering local down payment assistance programs that might let me contribute a minimum to down payment and keep the other lump sum for repairs and extra mortgage payments. Unfortunately, I don't have any relatives that are able to lend me any money or cosign to help out - I come from a poor background and hate seeing my parent's lives reflected in my future.

Do you have any suggestions for building up funds that I might be able to use over the next few months?

Thanks again!

@Joe Fairless Currently, I work 46+ hours a week for about $13/hr, giving me healthy chunk of overtime pay on top of full time pay. This job pays all my healthcare, so none of my extra income goes to that - and, I have tons of free time on the job to research other things (like REI!)... Beyond that, I typically get my entire tax return back at the beginning of each year. : ) Good addition to savings. My husband works two jobs, and we share a car that we own outright, so no wasted money on a car loan either. We carry very little CC debt, only enough to boost credit scores. Our income is pretty high for our skill set and age bracket, and our spending is very low (can you say 'non-smoker'? 'Non-partier'? 'Home cooking'? Food bank, canned food, etc...). Because we share a car, and my husband runs back and forth between jobs like a chicken with his head cut off, I'm really not sure there's room between us for more working hours.

I'd be a lot more interested in any creative financing opportunities! Haha.

Originally posted by @Kayla Davis:

I'm actually counting on providing average rents and projected income to allow me to purchase a multifamily property at all - I make far too little at my day job to qualify by that alone.

I think you need to research this further.  Given that the property will be owner-occupied, I don't think the lending institutions will factor in any rental income (on the original loan at least....they will if you refinance after owning for 12 months).  This can vary be lender, obviously, but it is definitely something to look into.

Based on your income level and savings, I think the multi-family may be too expensive.  Between saving up for the larger down payment and saving up for a realistic reserve, it sounds like you'll have quite a wait on your hands.  I think you'll be better off getting a small house or townhouse that is more affordable.  You can rent out a room for some additional income and, if you choose wisely, hopefully you'll have some appreciation so you can sell in a year or two and move on to a property more in line with your goals.

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