Buy and Hold

5 Replies

Hi everyone,

I'm a newbie to real estate investing and finally want to jump on board in buying and holding a townhouse/condo about 30 minutes from me. 

-The property will either be in a newly or recently newly constructed area. Or something built within the past couple years. New school systems and even a subway being built by the airport. Many people are moving to the existing properties.

-I'm looking at something around 150-250,000, but I guess this will all revolve around my motivation? That motivation would be a decent cash flow (might be more important than anything), appreciation of course, and the tax write off. 

-I would love to net at least $500 a month if possible.

-It's my understanding that an FHA (or is it VA?) that would be an ideal choice, but I would have to live in the property right?

-I have about 200,000 equity in my current SFH and one option I was told was refinancing and possibly using all of it to pay off the 2nd home completely. Then I'd have a much bigger original mortgage I'd have to pay off (with the rent). Is that smart??

-Is it personal choice to use all the equity and buy one home or a couple months with a smaller down payment in each for a possible bigger return? Or is one just a better choice?

Sorry for all the questions. I wanted to put everything in one place and depending on the responses split the questions up to the appropriate forums.

Thanks!!

Chris

Originally posted by @Chris DeChiara :

Hi everyone,

I'm a newbie to real estate investing and finally want to jump on board in buying and holding a townhouse/condo about 30 minutes from me. 

-The property will either be in a newly or recently newly constructed area. Or something built within the past couple years. New school systems and even a subway being built by the airport. Many people are moving to the existing properties.

-I'm looking at something around 150-250,000, but I guess this will all revolve around my motivation? That motivation would be a decent cash flow (might be more important than anything), appreciation of course, and the tax write off. 

-I would love to net at least $500 a month if possible.

I doubt rents will support a monthly net of $500 after expenses in a class A neighborhood....

-It's my understanding that an FHA (or is it VA?) that would be an ideal choice, but I would have to live in the property right?

FHA has very high PMI - do you have 20% for down payment? Maybe better to look at conventional. Also, PMI does not go away on an FHA IIRC. VA and FHA is for o/o only.

-I have about 200,000 equity in my current SFH and one option I was told was refinancing and possibly using all of it to pay off the 2nd home completely. Then I'd have a much bigger original mortgage I'd have to pay off (with the rent). Is that smart??

If this is going to be an investment purchase it may be a VERY good option for you assuming that you are able to get a 15-30 yr fixed rate w/o a balloon payment.

-Is it personal choice to use all the equity and buy one home or a couple months with a smaller down payment in each for a possible bigger return? Or is one just a better choice?

Not sure what you are asking here....

Thanks Justin.

All I could use is equity in my home to finance/buy a new home. That would negate the PMI then right? But it's a moot point if I'm not living there then?

I read about a scenario (in the Bigger Pockets book) of buying a house outright at say $300 return a month versus buying many houses with a down payment on each and ending up with say a $500 return. I have 200,000 equity and I'd like to use it the smartest, most advantageous way possible.

Originally posted by @Chris DeChiara :

Thanks Justin.

All I could use is equity in my home to finance/buy a new home. That would negate the PMI then right? But it's a moot point if I'm not living there then?

Yes - as long as you have 20% down you will not have PMI. If you take 200k equity out of your current house you could buy the investment property outright an not have PMI 

I don't know your market, but I would imagine that there are better ways to leverage 200k in equity than just buying one property outright. Leverage is VERY powerful in real estate. Maybe you should find a mentor before you tie up such a large amount of money.

Thanks. I literally have talked to ONE mortgage banker (and friend) about this and it seemed like that was an "ideal" option. 200K to buy outright that is. Just taking it with a grain of salt, not as gospel.

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