When to call a realtor

Question

Hey guys,

Just a little back story to my question:

I've been living in NYC for almost two years. Rent is absolutely outrageous here (I'm currently paying $1,400 a month for a one bedroom).

My plan is to by a multi family home with a FHA loan, live in one of the units and rent out the others. I want to live rent free (BP talks about this a lot so I'm sure I don't have to expand on the details here).

Right now, I'm saving up a down payment. 3.5% down is still a lot of cash when we're talking about NYC. I'd like to find something for $500,000 but $600,000—$750,000 is more realistic.

With that said, let's say I need a good $20,000 cash before I can take the next step. When should I start talking to realtors?

I'd love to know the area so well that, by the time I have the down payment and I'm pre approved for the mortgage, I will be able to spot a good deal.

What would you guys do if you were in my shoes? Reach out to realtors right now (I have a feeling they're not going to take me seriously at this point)? Find an investor/wholesaler who will guide me (I know I need to have something to offer them in exchange, again BP talks about this a lot)? Get into wholesaling? (and I know that's much easier said than done)

Thanks, guys!

Peter Tryon · Answer

Hey Nik, definitely check with a mortgage broker. Also find out what the max FHA loan amounts are for multi families in your area. Im in upstate NY and I know our max loan amount for FHA on a 4 unit is $720k. But good luck! You're definitely making a smart decision.

Nik Parks · Answer

Woops, not sure why I read mortgage lender instead of loan officer. Haha. Thanks again.

Brian, that's great advice. Thank you.

That's kind of what I was afraid of: wasting time.

Seems like Spring is the perfect time of the year to start exploring areas and familiarizing myself with the area. I was planning on doing that this weekend, in fact.

James H. · Answer

The only thing the realtor can do that you can't do without one is show you the inside of the units. I would start searching realtor.com and then driving around the areas where you are interested. Try to get lunch in those areas as an excuse to familiarize yourself. Before you know it. If you do this, you could buy a FSBO without any realtor at all and negotiate a better price. But it you must contact a realtor, I would say that 3 months prior to purchase would be about the soonest I would contact the realtor. Anything before that is a waste of both or your time. I would not even ask the realtor to show me units until maybe 1 month prior to puchase time.

Wayne Brooks · Answer

Yes, that was my suggestion; loan officer/mortgage broker.  It probably won't be a full 5% extra on that large of a loan amount, but I don't know who traditionally pays title insurance in your area, etc.

Nik Parks · Answer

Oh wow. I knew I'd need a little more than 3.5% but I didn't know it would be an additional 5%. Thanks for the heads up.

Last question, do you think it would better to talk to a mortgage broker first?

Thanks for your help, Wayne.

Wayne Brooks · Answer

Talk to a loan officer first.  You'll need another 5% or so cash for PMI, closing, prepaid insurance and taxes, etc.  you can reduce the cash outlay with a "rebate" from the lender, by accepting a slightly higher interest rate.  The loan officer can give you a Godd Faith Estimate which will give you a more accurate figure.  Also, assuming the property appraisal will support it, you can negotiate a 3%  Buyer Concession, from the seller, to contribute to closing costs.