Rental Property Investor · Roanoke Va · Member since 2019 · 16 posts · 3 votes
I am envisioning myself with single family rentals, a multiplex, or complex in the next five years..Here’s the thing. I’m in this mindset that I should be saving money until I “have enough”. Is this the right strategy? Or should I be financing more? Basically I’m looking to put 20% down. Yet when I had a conversation about this with my “loan guy” he said I can get in with 5% down.
I’ve listened to many of these podcasts and more and it seems like many wait until they have 20% down. Is this a fuzzy number, does it matter at all? Should I be waiting for the market to turn down to find a deal on the front end? I have so many questions and so much ambition, but not sure when the time is right and how much I should have to put down and as a back up if I plan to use a property manager.
Sorry for the ramble. Feel free to speak to any part of this lol. -Matt
@Joe Villeneuve what about trying to time the market for a better entry. I was sort of hoping to catch the market on a lower point to enter. Everything is so expensive now and I don’t want to buy high. Would you wait?
I like the 20% down. I know this is counter to many here on BP. I think you should also have some reserve just because things can go wrong.
I would not wait to time the market. Just need to be on the look out for a good deal. This can take longer when home values are up but deals can always be found.
Keep in mind that your first few properties are where you stand the greatest chance of making mistakes. With that in mind, I always recommend that if your first purchase is a mistake make it a small one, by buying something small.
I tend to always put 20% down but I don't know that it's that big a deal. The bigger deal is that you have plenty of cash stored up. All problems are catastrophes when you have no cash. For example, I have 38 units. I try to stay around $15k in cash and I have a $100k LOC. So far I feel comfortable at this level.
@Joe Villeneuve what about trying to time the market for a better entry. I was sort of hoping to catch the market on a lower point to enter. Everything is so expensive now and I don’t want to buy high. Would you wait?
If you want to do that, invest in a crystal ball...and let me know where you got it.
It can't be done...and you don't need to do it. Deals are made. If you are waiting to find them, you should get real comfortable, and expect a lot of competition. Buying low and selling high is the Stock Market way. It works in REI, but it is the simple way with limited life span of opportunity filled with too much competition to make it the most efficient use of your them and money.
I've never worried about the sale price, since whatever the seller and I agree to, isn't what it will actually cost ME anyway. It isn't the sticker price that has the greatest impact on your profit/cash flow. The greatest impact, and the most control you have, is in "how" you buy it.
@Matt Rose I don’t have rentals or anything but I heard from the bigger pockets podcast that not only do you have to save up for the 5% or 20%, you also have to save up for cash reserves just in case anything goes wrong. I hope it helps !
@Matt Rose hey something i have done to open up more cushion is using credit cards. Increase your line of credit for free by asking to extend line of credit. Thats free money and to the basics of rich dad poor dad, dont save money. Only use the credit cards for renovations or last min maintenance. Increase lines of credit is free money ans help with leverage. I hope my 1 cent makes sense.