How much is too much for your first purchase?

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How much is too much for your first purchase?

Nyle Emerson
Member since 2020 路 12 posts 路 16 votes

Hi guys, 

About myself; I'm a Philly native who's been living in Brooklyn for about 12 years. 33 y/o, single, no kids, and employed full-time working remotely. I'm looking to House Hack a multi-family in Philly or East Brooklyn where I currently live. I have an excellent credit score, and make mid-six figures, with cash reserves, a 401k, and a stock portfolio. I'd like to put about half of my cash savings towards my first investment. My long-term goal is to Buy and Hold or BRRR, to create a portfolio of rental units that will help support my mom with retirement. My short-term goal is to find a place to live, as I'm currently on a month-to-month lease.

There are two things that I recently discovered that threw me for a loop.

1)Wait, I qualify for how much???
The past five months I've been looking at homes in Philly's C/D areas for $200-$300k, to reno with a 203k and some sweat equity. Recently, I reached out to my broker at Cross Country and became aware that I qualify for over 700k mortgage through FHA. Which would allow me to purchase in Brooklyn. However, I could only afford a property this expensive if I can wrap the closing costs into the mortgage via seller's assist.

I'd love to purchase a home here, maybe in East New York or Flatbush. On the flip side, it would also allow me to cop a really nice turn-key triplex or quadplex on the University of Pennsylvania campus in West Philly for that amount. However, I'm wondering is it financially irresponsible to take out such a large mortgage for my first time purchase?

2) Bank of America will give me free money??

The second thing I recently discovered is the BOFA Affordable Solutions program. When I learned that I could get a $17k towards closing and downpayment costs, I was instantly interested. The downsides are that (1) The rate is a little higher at 3.2%, and (2) I make too much money for Philly or NYC. To use this loan I'd have to look in Newark, East Orange, Long Island, Hudson Valley, or even in Oakland where my job's headquarters are based. I'm open to living in any of these places for the next year if it makes more sense to go this way instead of an FHA.

So that's the gist. Right now I feel like I've got a case of "analysis paralysis" and information overload. I'd love to get your advice to put things in perspective.

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Steven Foster Wilson
Rental Property Investor 路 Columbus, OH 路 Member since 2017 路 3k+ posts 路 3k+ votes
5y
Originally posted by @Nyle Emerson:

Hi guys, 

About myself; I'm a Philly native who's been living in Brooklyn for about 12 years. 33 y/o, single, no kids, and employed full-time working remotely. I'm looking to House Hack a multi-family in Philly or East Brooklyn where I currently live. I have an excellent credit score, and make mid-six figures, with cash reserves, a 401k, and a stock portfolio. I'd like to put about half of my cash savings towards my first investment. My long-term goal is to Buy and Hold or BRRR, to create a portfolio of rental units that will help support my mom with retirement. My short-term goal is to find a place to live, as I'm currently on a month-to-month lease.

There are two things that I recently discovered that threw me for a loop.

1)Wait, I qualify for how much???
The past five months I've been looking at homes in Philly's C/D areas for $200-$300k, to reno with a 203k and some sweat equity. Recently, I reached out to my broker at Cross Country and became aware that I qualify for over 700k mortgage through FHA. Which would allow me to purchase in Brooklyn. However, I could only afford a property this expensive if I can wrap the closing costs into the mortgage via seller's assist.

I'd love to purchase a home here, maybe in East New York or Flatbush. On the flip side, it would also allow me to cop a really nice turn-key triplex or quadplex on the University of Pennsylvania campus in West Philly for that amount. However, I'm wondering is it financially irresponsible to take out such a large mortgage for my first time purchase?

2) Bank of America will give me free money??

The second thing I recently discovered is the BOFA Affordable Solutions program. When I learned that I could get a $17k towards closing and downpayment costs, I was instantly interested. The downsides are that (1) The rate is a little higher at 3.2%, and (2) I make too much money for Philly or NYC. To use this loan I'd have to look in Newark, East Orange, Long Island, Hudson Valley, or even in Oakland where my job's headquarters are based. I'm open to living in any of these places for the next year if it makes more sense to go this way instead of an FHA.

So that's the gist. Right now I feel like I've got a case of "analysis paralysis" and information overload. I'd love to get your advice to put things in perspective.

Listen to the banks, they will be on the conservative side of what you can and cannot afford. As far as making a smart real estate choice, thats where it becomes more tricky.

Buying rentals in NYC vs Columbus OH your looking at very different numbers and returns. The question becomes, what is your goal in it all?

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  • Jonathan Rivera
    New to Real Estate 路 Union City, NJ 路 Member since 2020 路 35 posts 路 15 votes
    5y

    Hey,

    I understand the analysis paralysis I've been going through a similar situation. Lets look at your short term goal of getting a place to live. If you're talking about living rent free you maybe talking about a living house flip or house hacking. Basically if you can live for free you're going to be able to save a lot of $$$$ vs having to pay month to month. Your analysis paralysis I believe is coming from trying to jam your short term goal to fit your long term goal. Focus on putting your mask on first, then help your mom put on hers. Can't help her if you're swimming in debt due to a bad deal. You can still help her if you're living rent free. So that's where I see the win win. 

    As far as how much, well the price shouldn't be a problem if the numbers line up properly. I can tell you that living in Union City, NJ (20mins from Newark) I can't really find anything at those higher price points that would allow me to live rent free, at least not without putting substantial money down, but that's my numbers, yours maybe different. Continue to run numbers and see what you would need to have in order to create the scenario you want. Usually my analysis paralysis comes from not having enough information. Shop around properties you would like and play like crazy with the calculator so you understand not just the environment, but that numbers of that environment. Soon you'll know what you want when you see it.

    0Reply
  • Alex Uman
    Investor 路 Montgomery County, PA 路 Member since 2020 路 255 posts 路 238 votes
    5y

    Hey @Nyle Emerson, I may be biased towards Philly but I'd say to look here as opposed to NYC for long term appreciation and growth. Additionally, I'd say definitely take out a smaller loan than the $700k you had mentioned. You sound like you're in a stable position and taking out such a large amount in potential debt would throw quite some risk into your portfolio. I'd look into lower cost value adds for more security and the opportunity to better diversify before jumping into a potentially risky and expensive house hack.

    0Reply
  • Steven Foster Wilson
    Rental Property Investor 路 Columbus, OH 路 Member since 2017 路 3k+ posts 路 3k+ votes
    5y
    Originally posted by @Nyle Emerson:

    Hi guys, 

    About myself; I'm a Philly native who's been living in Brooklyn for about 12 years. 33 y/o, single, no kids, and employed full-time working remotely. I'm looking to House Hack a multi-family in Philly or East Brooklyn where I currently live. I have an excellent credit score, and make mid-six figures, with cash reserves, a 401k, and a stock portfolio. I'd like to put about half of my cash savings towards my first investment. My long-term goal is to Buy and Hold or BRRR, to create a portfolio of rental units that will help support my mom with retirement. My short-term goal is to find a place to live, as I'm currently on a month-to-month lease.

    There are two things that I recently discovered that threw me for a loop.

    1)Wait, I qualify for how much???
    The past five months I've been looking at homes in Philly's C/D areas for $200-$300k, to reno with a 203k and some sweat equity. Recently, I reached out to my broker at Cross Country and became aware that I qualify for over 700k mortgage through FHA. Which would allow me to purchase in Brooklyn. However, I could only afford a property this expensive if I can wrap the closing costs into the mortgage via seller's assist.

    I'd love to purchase a home here, maybe in East New York or Flatbush. On the flip side, it would also allow me to cop a really nice turn-key triplex or quadplex on the University of Pennsylvania campus in West Philly for that amount. However, I'm wondering is it financially irresponsible to take out such a large mortgage for my first time purchase?

    2) Bank of America will give me free money??

    The second thing I recently discovered is the BOFA Affordable Solutions program. When I learned that I could get a $17k towards closing and downpayment costs, I was instantly interested. The downsides are that (1) The rate is a little higher at 3.2%, and (2) I make too much money for Philly or NYC. To use this loan I'd have to look in Newark, East Orange, Long Island, Hudson Valley, or even in Oakland where my job's headquarters are based. I'm open to living in any of these places for the next year if it makes more sense to go this way instead of an FHA.

    So that's the gist. Right now I feel like I've got a case of "analysis paralysis" and information overload. I'd love to get your advice to put things in perspective.

    Listen to the banks, they will be on the conservative side of what you can and cannot afford. As far as making a smart real estate choice, thats where it becomes more tricky.

    Buying rentals in NYC vs Columbus OH your looking at very different numbers and returns. The question becomes, what is your goal in it all?

    2Reply
  • Joseph Gordon
    Rental Property Investor 路 Member since 2018 路 14 posts 路 4 votes
    5y

    Hey @Nyle Emerson

    I am in a similar boat as you. I recently moved to Newark (still paying rent, but cheaper than Brooklyn) to find a place here or in East Orange. Analysis Paralysis is REAL especially in real estate (especially if you like/ work with data and figures). I think to overcome that is to start jumping in. Getting a realtor, seeing houses, going to open houses, and networking. You can still analyze the deals, but you will also start to learn about your own preferences (For example, after a few months of searching, I know a backyard and driveway are important for me. Didn't realize that before). Although I am "technically" in the same spot I was a few months ago, I can say I have networked with more folks, raises for capital/ cleaned up my credit score, and narrowed down my preferences and strategies.

    In terms of the downpayment programs, I think they are amazing, but I realized a lot of them restricted me (due to my income level) than helped. There are a few restrictions (from how long you MUST live there to where you can buy) that I didn't like, and with the rates how they are, I probably won't use them. I would just do the math with and without them. Free money is great money, but it may not align with your goal/ strategy.

    0Reply
  • Jaron WallingPro Member
    Rental Property Investor 路 Indianapolis, IN 路 Member since 2018 路 4k+ posts 路 4k+ votes
    5y

    I would always choose the more conservative route to finance a deal. You need to provide actual numbers otherwise it's just ideas and nothing really happens. "Free money" nothing in life is free. It's like the public service loan forgiveness program, <1% of the borrowers were approved. 

    Surprised no one is talking about the elephant in the room... the PRICES are still SKY HIGH! With all the people moving away from NYC you would think a dip is coming. Why not wait for that dip and see what happens? What's the rush.  

    0Reply
  • Brendan McAllister
    Real Estate Agent 路 Philadelphia 路 Member since 2020 路 28 posts 路 28 votes
    5y

    House hacking is a great strategy to get the ball rolling. @Nyle Emerson, would you consider buying a duplex/triplex that is a fixer upper? Also, did you think about buying the property in cash? You seem like you have a fair amount of liquid reserves, so I think that could be a good option. If you were to buy a multi family rehab with cash, that would allow you to then refi out all that money (hopefully) once you fix up the house, and add tenants in the other unit(s). Alot of investors tend to go that route, since it is easier to pick up the best prices with a cash (or cash equivalent) purchase. That may not be an option in NYC, but it is viable for Philly. 

    Also, with the analysis paralysis I think it just comes down to what you want to do. First thing is that you should definitely try to decide where you want to live before you start looking at deals. At the end of the day you are going to want to live in the city you invest in as well, so that's one of the most important factors to this decision. Look at it in a more general sense. Since you sound like your goal is to eventually grow your portfolio, make sure the city is one that will allow you to do that. Personally, I only am an expert in the Philadelphia market, but I know that the other cities you mentioned are pretty inflated. NYC, the Bay Area, North Jersey are all pretty competitive and expensive. You could still get it done with a quality lender, but it would be a little more complicated. Philly may be a better option if you want to continue to buy more rental properties. The city is relatively cheap and there are many great pockets that are still appreciating heavily. 

    Here are some good articles that I think can help you out!

    https://www.daveramsey.com/blo...

    https://www.biggerpockets.com/...

    Feel free to reach out if you have any questions my man

    0Reply
  • Nyle Emerson
    OP
    Member since 2020 路 12 posts 路 16 votes
    5y

    Thanks guys, this is my first real post and I appreciate all of the quick responses and advice. 

    @Jonathan Rivera, when I say "house-hacking" I'm not referring to living rent-free, but merely being an owner occupant in MFH home, and using the tenants to subsidize my rent. Your advice about "putting on your mask first" hits home. I think I am trying to do two things at once, really appreciate that advice.

    @Alex Uman, thanks, man! I've been looking at homes in Cobbs Creek, Mantua, Powelton, Belmont, in the $200-$300k range. Most of them I projected to cashflow $5k/year. I've heard that appreciation is less important than cashflow when looking at properties. There are a couple of triplexes/quads in University City for 500k -600k (turnkey), that cashflow around $11k/year. U City seems like a solid choice in case the bubble does burst, college kids and grad students will always have $$ and need a place to stay. That's what I've been telling myself, but I like your advice of taking less risk, and not biting off more than I can chew. 

    @Steven Foster Wilson my goal is cash flow, and I know the Midwest and down south are my best bets for rent equity. However, since I'm looking to use owner-occupant loans, I'd like to stay on the coasts. Call me bougie, but I'm not living in Columbus for a year. Maybe a turn-key investment somewhere down the line.

    @Joseph Gordon let's link bro,

    @Jaron Walling, yes, thanks for saying it. I'm very new to real estate, but every day I get floods of articles and Youtubers saying the bubble is about to pop in 2021. The only thing is that they've been saying that since 2018 and it still hasn't happened. Your "what's the rush" comment brings me a lot of relief. I work remotely, so I could be chilling in Malibu or something rn, and still saving money. On the flips side, however, NYC prices have been dipping. But experts also say "don't try to time the market." So I'm trying to figure out if I should make a conservative move right now, or wait a while. Your comment is another tic in favor of "pump the brakes and see what happens."

    @Brendan McAllister I'm definitely down to buy a MFH that can be fixed up with a streamline 203k or Fannie Mae Homestyle. Especially if I can find one on a nice block in an opportunity zone, so I can get 50k streamline/limited instead of the usual 35k. Would love to force the equity. Right now, I don't have enough cash to purchase a property unless I go to a sheriff sale and hope for the best. Thanks for the articles, will definitely check them out. 

    5Reply
  • Remington LymanBusiness Member
    Real Estate Agent 路 Columbus, OH 路 Member since 2017 路 6k+ posts 路 7k+ votes
    5y
    Originally posted by @Nyle Emerson:

    Thanks guys, this is my first real post and I appreciate all of the quick responses and advice. 

    @Jonathan Rivera, when I say "house-hacking" I'm not referring to living rent-free, but merely being an owner occupant in MFH home, and using the tenants to subsidize my rent. Your advice about "putting on your mask first" hits home. I think I am trying to do two things at once, really appreciate that advice.

    @Alex Uman, thanks, man! I've been looking at homes in Cobbs Creek, Mantua, Powelton, Belmont, in the $200-$300k range. Most of them I projected to cashflow $5k/year. I've heard that appreciation is less important than cashflow when looking at properties. There are a couple of triplexes/quads in University City for 500k -600k (turnkey), that cashflow around $11k/year. U City seems like a solid choice in case the bubble does burst, college kids and grad students will always have $$ and need a place to stay. That's what I've been telling myself, but I like your advice of taking less risk, and not biting off more than I can chew. 

    @Steven Foster Wilson my goal is cash flow, and I know the Midwest and down south are my best bets for rent equity. However, since I'm looking to use owner-occupant loans, I'd like to stay on the coasts. Call me bougie, but I'm not living in Columbus for a year. Maybe a turn-key investment somewhere down the line.

    @Joseph Gordon let's link bro,

    @Jaron Walling, yes, thanks for saying it. I'm very new to real estate, but every day I get floods of articles and Youtubers saying the bubble is about to pop in 2021. The only thing is that they've been saying that since 2018 and it still hasn't happened. Your "what's the rush" comment brings me a lot of relief. I work remotely, so I could be chilling in Malibu or something rn, and still saving money. On the flips side, however, NYC prices have been dipping. But experts also say "don't try to time the market." So I'm trying to figure out if I should make a conservative move right now, or wait a while. Your comment is another tic in favor of "pump the brakes and see what happens."

    @Brendan McAllister I'm definitely down to buy a MFH that can be fixed up with a streamline 203k or Fannie Mae Homestyle. Especially if I can find one on a nice block in an opportunity zone, so I can get 50k streamline/limited instead of the usual 35k. Would love to force the equity. Right now, I don't have enough cash to purchase a property unless I go to a sheriff sale and hope for the best. Thanks for the articles, will definitely check them out. 

    Columbus, Ohio can be bougie if you want to make it. It is also suuuuper cheap here. I moved here from Connecticut in 2012 and I now own a solid chunk of the city. I still rent a $700/month apartment with my squatter fiancee and my dog. I save all of my money and just throw it back into real estate.

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
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  • Account Closed
    Rental Property Investor 路 Brooke Park Drive 路 Member since 2018 路 1k+ posts 路 2k+ votes
    5y

    I鈥檓 confused, your bougie, but looking at buying in D areas of Philly?

    2Reply
  • Jonathan Soto
    Lender 路 Newark, NJ 路 Member since 2016 路 695 posts 路 252 votes
    5y

    i own in Newark, if you have any questions i'm more than happy to assist

    1Reply
  • Robert EllisBusiness Member
    Developer 路 Miami, FL 路 Member since 2014 路 3k+ posts 路 1k+ votes
    5y
    Originally posted by @Nyle Emerson:

    @Steven Foster Wilson my goal is cash flow, and I know the Midwest and down south are my best bets for rent equity. However, since I'm looking to use owner-occupant loans, I'd like to stay on the coasts. Call me bougie, but I'm not living in Columbus for a year. Maybe a turn-key investment somewhere down the line. 

    You'd be surprised how many people move to Columbus from the coast and rave about the city, never count out the Buckeyes

    [email protected]786-494-6766
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  • Nyle Emerson
    OP
    Member since 2020 路 12 posts 路 16 votes
    5y

    @Remington Lyamn, @robert Ellis, @michael P.

    MY BAD GUYS! I will never speak ill of Columbus or the great state of Ohio ever again 馃槸

    Go Buckeyes!

    4Reply
  • Remington LymanBusiness Member
    Real Estate Agent 路 Columbus, OH 路 Member since 2017 路 6k+ posts 路 7k+ votes
    5y
    Originally posted by @Nyle Emerson:

    @Remington Lyamn, @robert Ellis, @michael P.

    MY BAD GUYS! I will never speak ill of Columbus or the great state of Ohio ever again 馃槸

    Go Buckeyes!

    I am originally from Connecticut. Ohio > NY > CT in my opinion 

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    1Reply
  • Alex Uman
    Investor 路 Montgomery County, PA 路 Member since 2020 路 255 posts 路 238 votes
    5y

    @Nyle Emerson Ohio gang just pulled up on this post wow!

    1Reply
  • Alex Uman
    Investor 路 Montgomery County, PA 路 Member since 2020 路 255 posts 路 238 votes
    5y

    @Remington Lyman also originally from CT. No plans on moving back there for me...

    1Reply
  • Remington LymanBusiness Member
    Real Estate Agent 路 Columbus, OH 路 Member since 2017 路 6k+ posts 路 7k+ votes
    5y
    Originally posted by @Alex Uman:

    @Remington Lyman also originally from CT. No plans on moving back there for me...

    CT is a great case study on how to run a State. Just do the opposite of everything they do and you will be prosperous. 

    [email protected]614-541-8475Podcast Guest on Show My Job Laid Me Off, So I Replaced My Salary with Rentals
    Reafco512 Reviews
    WebsiteView Page
    1Reply
  • Craig Bellot
    Property Manager 路 CT 路 Member since 2014 路 687 posts 路 329 votes
    5y

    Hey @Nyle Emerson, Congratulations on this breakthrough!

    Indeed, starting a new venture is almost always the most difficult part of the journey! With so many factors to consider, I would recommend as a new investor is to get a handle on analyzing the income, expenses and ROI of these properties in Bridgeport CT. Connecticut in general is in a sellers market. You will need to be creative in negotiating to get the price / terms you need.

    You can use the Bigger Pockets calculators to start. Right now rents are strong, you can get $800 for a 1 bed, $1100 for 2 bed, and up to $1300 for a 3 bedroom. Use Zillow and rentometer.com to get data and analyze a few from your home to see what type if returns there are.

    If these meet your investment criteria then start looking in person by contacting the listing agent.

    Welcome to the community, if you have any question, hit me up and I'd be glad to help!

    0Reply
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