I have been reading on this site for about a month now and soaking in the information.
Little background to start: Im 22 years old, licensed plumber working full time as well as running my own plumbing cash business on the side. I decided I wanted more out of my future than one source of income running my own business so I came across REI. Currently still saving money living with the parents but got the 1-2 year warning as in (time to get lost and find my own place)
I have been going back and forth on my decision to buy a multifamily or SFH as my first property. Seems like multifamily is the way to go BUT, I have decided to do a USDA loan for a SFH and was hoping for some advice to steer me in the right direction or to tell me Im doing it all wrong.
My plan is to buy a small SFH in a neighborhood that I could walk to the beach for around 180-250k. In my area (Plymouth, Ma) there are tons of properties in such areas. I personally dont care about the beach but as a future investment when I move out I would like to keep the property as a rental because of its location. With my income I could still save money while living in this home for a few years and I understand that the rental wouldnt work if the mortgage was too high so id have to look for a killer deal. After I save up enough money my plan is to FHA in to a duplex and house hack.
I dont know if im planning this backwards or what but as of right now there are very limited MFH's to purchase even close to my area for what i can afford and the USDA has no wait list as of right now.
The pressure is on!
Any advice would be appreciated!
welcome! Plymouth is a great town..l Americas Home Town, right? You have obviously done your research, but you should consider and truly find out if you want to buy near the beach or rent by the beach and buy in a better area. That all comes down to numbers. Keep doing your research and welcome!
I'm having trouble understanding why you want to buy a heavily cash-flow negative property for your first purchase. It's not an investment, it's a cash drain.
You're doing everything right by living lean, saving money, sticking with the folks for as long as possible and building a skill based business. It would be advisable to put that basis to work with fixer multi-family that you can 1) actually cash flow on 2) build some great equity in using your skill set.
Why do you think buying a 200k+ beach house would be a good idea? You want income? Then buy an income producing property.
Thanks! Glad to be hear.
Since it is Americas hometown it is a HUGE area for tourists. It is busy here year round which is great for local business' and property owners. Definitely looking to buy within 10 minutes from the beach so I could potentially use it as a vacation rental in the future. especially since Plymouth is only improving every year.
Thanks for your input!
Thanks for the advice Sam!
To be honest I havent done much if any research on how much these beach properties are renting for in my area. Its the time limit I have to find a place that is putting me in to a mild panic. So the ideas are kind of flowing in any direction whether they make sense or not, but at least i can take in advice and eliminate some of these ideas and move on to better strategies. I would love to come across a cash flow property because i can fix it up myself and save huge money especially with plumbers labor rate of at least $100/hr around here. I guess i need to give it more time to find that deal, even if it comes up wihin a month of me getting the boot!
It's awesome that you are very adamant about doing this. -- I am also somewhat new to the business and am in your shoes. I do think you need to do some soul searching just to piggy back off of Nick's statement.
When I think about both scenarios I do like the MFH option first, only reason being, is that this way you can live as if you were living in a SFH but have that extra passive income with potential tenants. This would then allow you to generate equity at a faster rate with your active income (profession) along with your passive income.
But with your situation and scarcity of good deals for MFH around your location, the path you're choosing would be understandable.
You just want to ensure that you have budgeted correctly and set aside enough for maintenance costs to the SFH on top of the mortgage and living expenses. So you can be sure that the house is being treated as an asset and not as a liability, since you will only be relying on your active sources of income. - We want our assets to work for us!
Are you far off from affording a MFH in the next year?
Hi William, Thank you for your advice!
The problem im having with the MFH search is that 1) they are limited in my area (needs to be in my area to house hack because i take a company truck home and need to stay somewhat local) 2) the ones that are available are affordable but are in the highest crime areas in the county. The properties are close to total tear downs as well. I do search everyday for new listings and hopefully i can come across a MFH that isnt in a neighborhood that s filled with crime. I should have re phrased what i had previously said about not being able to afford it. im nearing 20k in the bank so a 3.5% down payment on a 250k wouldnt be an issue. its the location that really wouldnt be worth it. (murders, heroin problem, ect.)
the great part about the USDA first home buyers program is that they base your mortgage off of your income, so i would be able to save money, have a place to live (i dont want to rent) and fix it up in the years im living there and hopefully turn it in to something profitable. Ill have to do my research to see if it would actually work that way!!
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