Sell/buy in what order?

12 Replies

My wife and I want to start our investment career by selling our current sfh and moving into a 2-4 unit multi family. Our reasons for this are twofold.

First, the roughly $50k in equity we have would give us money for down payment, closing costs, and cash reserves without having to deplete our emergency fund or spend the next couple years saving before we can invest.

Second, we want to take advantage of owners occupant financing such as FHA on this deal to get the low interest rate and down payment as this seems like the easiest way to get started.

My question is what order of operations do you folks recommend? Do we put our place on the market first and sell with a contingency of us purchasing a new place first? Or get pre approved for a loan and start making offers to buy with a contingency that we must sell our house before we can close? The third option, as I see it, would be to sell, close, and move with my wife and two kids into a rental or with family while we look for a new place, but I would prefer not to move them twice unless absolutely necessary. 

I am confident that my house will sell fast in my market, as they all seem to sell within a week lately, but the inventory of multis is fairly low, so it might take a while to find the right deal to buy. 

Thank you for taking the time to read and help a newbie!

That's always a tough one. You could sell and move into an apartment while you find your multi-family property, but then you will probably have to sign at least a 6 month lease and you would be moving twice.

What I would look into is possibly taking out a home equity line of credit (HELOC) with a bank or credit union (Check with a few and see what loan to value (LTV) they will give you), use that money for the down payment on the multi-family, move into the multi-family, then sell your house.

Now, I don't know your market at all so I don't know if that's going to provide enough down payment money, but there's always a way if you're hungry for it. Maybe pair a HELOC up with some other loan avenues like a 401k loan or a loan from a nice family member (offer interest on the money for their help). And if none of that pans out, get serious about cutting your living costs and save.

Another thought: Start looking for multi-family properties soon (not just on the MLS. Try Craigslist, etc.). Ask sellers if they're interested in providing seller financing. If they will finance the loan you may be able to agree on a lower down payment. You never know until you ask!

Originally posted by @Nathan Reed :

That's always a tough one. You could sell and move into an apartment while you find your multi-family property, but then you will probably have to sign at least a 6 month lease and you would be moving twice.

What I would look into is possibly taking out a home equity line of credit (HELOC) with a bank or credit union (Check with a few and see what loan to value (LTV) they will give you), use that money for the down payment on the multi-family, move into the multi-family, then sell your house.

Now, I don't know your market at all so I don't know if that's going to provide enough down payment money, but there's always a way if you're hungry for it. Maybe pair a HELOC up with some other loan avenues like a 401k loan or a loan from a nice family member (offer interest on the money for their help). And if none of that pans out, get serious about cutting your living costs and save.

Another thought: Start looking for multi-family properties soon (not just on the MLS. Try Craigslist, etc.). Ask sellers if they're interested in providing seller financing. If they will finance the loan you may be able to agree on a lower down payment. You never know until you ask!

Thanks for the advice. I thought about the Heloc, but I'm not sure if I can get financed to carry both mortgages and a HELOC. I guess I won't know until I ask though.

If you wait to buy and then sell be prepared to pay more on the buy side to stay competitive.  Financially usually it is best to sell first and then buy as this will give you access to your funds and you are ready to pull the trigger at anytime with no contingency to sell causing a much stronger offer.  In the SD market right now it is very difficult to get a contingent offer accepted unless you over pay for the property because demand is so high for housing. If you have to capabilities to sell first I would recommend that route.  best of luck

Hi @Tyler Rodgers ,

My recommendation is to start at the financing.

First see if you can afford having both properties as far as the bank is concerned. Can you on paper with the bank take out both mortgages at the same time?

If that answer is yes, then I would get the pre-approval letter for that and begin looking, not only can you rent out half of the duplex, you can use your current house as a rental if you so decide (it doesn't sell quick enough for your liking or you just want to start with 2). You have more options.

If the bank says no, then you are dealing with having to sell first (or at least having them tied to each other). Knowing that answer may help you make a better decision.

Good Luck!

Thank you Mike cumbie. That's a good perspective. Side note, how do I tag people in my posts? Thanks. I'm such a newbie...

  @Tyler Rodgers

Type @ followed by their name. Do keep in mind that you can only mention people that you are colleagues with OR that have previously posted in the thread you're posting in.

I tried that in another thread. Didn't seem to work... @naveed q.

@Tyler Rodgers

Type the @symbol and then 3 letters of their name. You should see it appear in a drop down, click it.

It will only work if they have replied in this thread or you are connected.

Hope it helps some and welcome!

Tyler,

You and your wife have chosen a good place to start your investment career. The Med School in Lebanon will be providing quality renters for many years to come. I would certainly recommend that you always start with a pre approval for a loan.  You want to be ready if a good opportunity comes your way. My wife and I are investors and realtors in the Mid-Willamette Valley.  Assuming that you are selling and purchasing in Lebanon itself,  I would not recommend that you sell first and then look for a place to purchase.  Although the market is likely to be slower now, as we get into Winter, your house should have no problem selling. Still, buying with a contingency that you have to sell your house first, puts you at a serious disadvantage compared to other (especially cash) investors that you will be competing with. The third option, as you mention, is not an easy one for your family but it may be the best one, if you have it available.  However, it can put a lot of pressure on you to make a less-than-optimal deal if the it takes too long to find your multi-family unit. Always expect the unexpected. We wish you well in your journey.

I would look for the investment property first - - IMO it will be harder to find a good investment that to sell what you have.  There are lots of issues to be considered for a B&H property as you will be operating it for several years - - location and specific neighborhood will be important.

1. see your lender, 2. SFH detached are hot, attached are not, find your next deal, set up a longer closing, contingent on yours selling, then sell yours, 3. you might get back to back settlements, 4. move. :)

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