would 5,000$ be a good downpayment?

17 Replies

Currently I am looking to invest in a duplex (+) in the Orlando area. I have been reading and learning a lot this past month about REI and listening to the podcasts. My question is how much should I raise for a down payment on a multi family in central florida? I am thinking raise $5,000 (which would take me about March) then try and get an approval for a loan at a bank then finally start my search. I would be a first time home buyer planning to move into the property and possibly "househack"

By the way what i currently do for a living is home designs such as kitchen backsplash, bathrooms, and tile and work also sometimes for investors., Contact me if you are an investor/wholesaler/and possibly also a money lender to talk and make things happen.

The problem that I see, unless you get FHA Loan for 3.5% down, banks tend to want 20% down. Do you qualify for VA loan? or FDA? It really depends on your situation.

$5000 as 3.5% down is a loan of about 142,000 at 20% down it is a loan of 25,000. How much rehab are you planning and how will you finance it?

Just too many variables to unwind, I think I would do things the other way around, find the deal and if it is good enough the money will follow.

@James Wheeler Okay thanks for that. Rehab work i would plan on doing my self and If anything i can get my crew involved. Well i'm not qualified for VA but fda not sure.. The thing is I just started generating income this year as i never put any of my earnings in the bank last year, bank told me i need 6, possibly 3 months of steady income in my bank so that is why i am currently waiting...

@Chris Seveney Well price not sure that is why was hoping someone in my area would help. 2. Yes i would plan on occupying and renovating so i can rent out other units and or bedrooms. 3. Well being a first time home buyer i figured i have a lot of options. right now i need to prove that i have income so am working on that currently so i can then apply for loans. And well i hear i need atleast 3-6 months of steady proof of income so that is what i am looking to wait. I would have atleast 5k saved aside by then..

@Christian Benitez I've been hunting for duplexs/multi-family in the Orlando area (Sanford, Orlando, Lakeland, Tampa, etc...) and the reality is, most multi-family homes that I have seen thus far are in warzone areas (High Crime), so you'll have to be careful with picking your location. I have found some decent properties which aren't in the middle of high crime zones, but they're close. You'll have to drive the area and get a feel for the neighborhood. 

Another option may be to hunt in the UCF area for a SFH and rent the other rooms out to decent college students. You lose some privacy, but the rental market around UCF is probably pretty high ($650/$700/mo per room when I was going there 10 years ago).

@Christian Benitez , @Andrew Thorell has great info!  Ontop of what he said I would recommend going and sitting down with a few different lenders.  They will tell you exactly what you need.  I say different lenders because different type of banks/lenders have different rules.  Find someone that what you want to do works for and that you feel comfortible working with.  This is Free, they don't get paid until you close so go get some free knowledge and have the plan before April.  

@Christian Benitez I am closing on a duplex in Tallahassee next week and house hacking it as well. I suggest you do as @Adrian Smude instructed and talk to a couple of lenders to make sure the info you have received is correct and you will qualify for the loan that works best for you. Secondly make sure you consider the other cost like the inspections, closing cost and appraisals. Also some expenses regarding MFH are more expensive then SFH.

What is the hurry. Why not save up 20% DP with another 10k for things that pop up. Risk can take you down faster then a tiger. Be patient.

@Christian Benitez Agree with all stating that you should sit down with a few banks to find out what you will need.  Your local banks will be more helpful than the big banks (BofA, Chase, etc).

With that said, even with a 3.5% down loan, $5k would be pretty hard to find. You will likely have to get the seller to cover some closing costs. Closing cost not only includes down payment, but insurance (must pay 1yr upfront), survey costs, PMI prepaids, state/city/county recording fees, etc. My guess is that with out the seller given you some closing cost credits, your target downpayment will not allow you to buy anything over $100k, which is likely to not by much in Orlando.

@Christian Benitez  

Welcome to BiggerPockets! House hacking with an FHA mortgage is a great way to start with purchasing up to a 4 unit property Multifamily and only 3.5% down.

Also a 203K Loan is part of the FHA loan program. This is another great way to start.

This is a great way to learn how to be a landlord, you can live there for free with cash flow

Look for a small local Community bank or small local credit union.

Much success to you!

@Christian Benitez  

Below are some links to get you started. Much success to you!

I received this info from @Nathan Sharp when I first started.

https://www.biggerpockets.com/renewsblog/2013/11/02/hack-housing-get-paid-live-free/ (House hacking)

https://www.biggerpockets.com/renewsblog/2014/03/13/investing-multifamily-ben-leybovich/ (Podcast 061 - How to succeed in multifamily investing)

https://www.biggerpockets.com/renewsblog/2013/04/09/how-to-buy-a-small-multifamily-property/ (How to buy a small multifamily property)

https://www.biggerpockets.com/renewsblog/2015/11/16/how-to-choose-areas-multifamily-deals/ (Choosing multi-family deals)

http://www.biggerpockets.com/renewsblog/2014/07/19/how-to-buy-a-duplex/(guide to buying a duplex)

https://www.biggerpockets.com/renewsblog/2013/12/12/bp-podcast-048-duplex-managing-tenants-darren-sager/ (Duplex investing)

Now that you have made the move, below are some links that will help with the navigation of the site.

https://www.biggerpockets.com/courses/a-beginners-introduction-to-real-estate-investing (video courses)

https://www.biggerpockets.com/real-estate-investing (Ultimate beginner's guide to REI)

Before your 1st purchase, please ensure you visit the below link for some tips.


REI books suggested by BPers

https://www.biggerpockets.com/renewsblog/2015/11/13/7-real-estate-books-beginner-investors/ (7 absolute must read books for beginner REIs)

http://www.biggerpockets.com/renewsblog/2013/04/14/best-real-estate-books/?utm_source=search&utm_medium=internal&utm_campaign=books (books recommended by BPers)

Simply, bone up on the areas that you need to expand knowledge in such as, Forums, Marketplace, Learn, Network, Analyze and Resources.

Continue to feast on the Podcasts, #askbp Podcasts, blogs and webinars 

Depends and many other factors........ 

With an FHA mortgage, you are required to put down 3.5%. You can ask the seller to pay up to 6% towards closing costs. If you need to use rental income to qualify, you would need cash reserves and this definitely wouldn't be enough.

From my experience cracked paint on the outside of the house can be enough to stop and FHA mortgage from going through. If you are looking at a rehab and a FHA you will have to get a 203k loan added on for sure and probably pay an approved contractor to do the work up front. I would suggest looking for a turn key property for your first and get the property management side solid and then when you have some experience you can start looking for investors and commercial loans to take on properties which have a greater risk/reward.

@Christian Benitez , save a bit more and than go the FHA house-hacking route on a 3- or 4-unit. I believe this the best option for a young person looking to get started investing in real estate is to buy a triplex or fourplex with 3.5% down FHA financing.

One thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% of the market rents on all the units need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search.

@Christian Benitez you will also need money for closing costs on a property. I would suggest saving more money than that you will also need a reserve some banks require atleast 2-3 months of the mortgage  amount per month in savings

As of today, in Polk, Lake, Orange, Osceola, and Seminole counties there are 58 duplexes for sale.

They range in price from $ 25,000 to almost a million dollars...

It is a "target rich" environment.

If you need some help, all you need do is ask!

John Rogers
Florida Trust Realty