My wife and I are looking to purchase our first home in Northern Colorado. We want to purchase a duplex, fix it up, and move out after a year or so and make it a rental. I have a few questions regarding this:
1. Is it worth it to try and save a little longer to have a higher down payment so it will cash flow or is it better to get in as soon as we can and reduce housing costs?
2. I read that if we do an HSA loan then the only way to get rid of PMI is to refinance. Given that rates are very low currently, is it worth it to gamble and hope that rates are still low when we reach 20% equity?
I hope this makes sense. Let me know if you need more information!
With these interest rates ( very low ) and our new president. Look at gas prices since.
I would not hesitate. Inflation on Real Estate is going crazy everywhere.
Buy it now is my vote!!
Being a little bit negative cash flow, but appreciation and interest rates are so great.
You could always sell it if it is a bad decision and probably still do good.
@Anthony Bratina Essentially you are using the benefits of primary residence loan to get into real estate quicker. So understanding this, and knowing you will be paying half the rent anyway, is the cashflow the goal right now? I would argue no. Although I don't actually know your goals, I would say The goal is getting a property for low money down while rates are low.
Look at it this way, if you bought a normal house whereby you were the only renter, the argument wouldn't matter because it wouldn't cashflow day one at all, or ever(possibly).
If you wait for a larger down payment, sure this will lower the possible PMI, however, rates might increase anyway and it will be a non factor. As debt is cheap, real estate is expensive but when debt is hard to come by (rates increase), real estate is less expensive. A two edged sword.
Back to the property, You can always refinance or sell at some point. What you can't do is get your time back. I'd jump in and learn, improve and keep going.
Side note: I've refinanced in 6 months or less and pulled out down payment plus renovations on duplexes(market dependent). So depending what you can do in 6-12 months, you might be better off than you think.
There are some good owner occupant loan programs out there right now so I would lean towards buying sooner rather than later. I was just talking to a lender that has a product that provides down payment assistance that is forgiven after a period of time.
There are strong arguments on both sides if the housing market in NoCo will continue to increase or decrease in the near future. A lot of them circle around what will happen with the mortgage rate and what will happen when the foreclosure memorandum is over. With NoCo being a strong appreciating market and the possibility of inflation heating up getting in sooner would be a way to protect the money you do invest and get more for your money.
In my opinion it is more important to buy right, getting a property below market value that cash flows even with PMI. That gives you flexibility for if and when you refinance. In NoCo that would most likely mean going off market to find something that works, as most on market small multis are overpriced right now (especially in Fort Collins.)
As a Realtor my main focus is working with house hackers to find properties that will work for them in Northern Colorado. I just helped a client find an off market duplex in Greeley which he is house hacking that was well below market value. DM me if you are interested in talking further, I would love to answer any questions you might have even if you did not use me as your agent.
I also host an investors networking meetup group which is a great place to connect to other investors in the area. It is called The NoCo Badass Real Estate Meetup. It is pure networking and we do not pitch any products or programs. You can find more information here on BP under events or an meetup.com
That is really helpful. Thank you. I guess now it is just a matter of waiting for the right duplex to pop up.