Bethlehem PA (bethlehem, pa) · Member since 2018 · 11 posts · 2 votes
I’ve been learning as much as I can about investing and my plan at first was to save up money for 2-3 years but now I’m wondering if it’d be possible to invest in a rental property with only $10,000 saved up. If it is possible, what kind of property do you think I’d be able to get? (Price wise). I’m still going to be learning as much as I can but by next summer I want to start getting into the investing. Thanks!
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
8y
What's your current situation? Single? Married? Co-habitating with somebody? Full time employment? Renting?
There is no need to wait to house hack. 2-4 plex, 3.5% down with FHA loan. If you're renting, what is your rent? You can almost always improve your situation with a house hack of even a duplex. You said you might wait 3-4 years. In 3-4 year from now with a house hack today, you may have another 20% down to buy even more properties!
Also, I don't feel you have to have a ton saved for capex and the like right away. Get a home owners warranty for first 12 months on your house hack for any large expenses that come up, and treat the place like a true rental. i.e. If you're currently paying $1,000 a month rent, keep paying that amount, even if it's to yourself (the house hack account), and save quicker. Your tenants will pay at least 50-60% of your mortgage or more, and you continue on your current budget and savings rate for the expenses or vacancies that will happen.
Go to a bank, apply for a FHA mortgage, and then find a great realtor to show you around and look at some multi family homes. $200,000 multi family is easy to get into with $10k cash. Keep in mind, if you close on say the 2nd of the month, your mortgage won't be due for almost 60 days. In the meantime, you'll get that first months rent (prorated from seller), and that 2nd months rent from tenant, without any rent or mortgage payment from yourself. So, sock away all that money and then some in your first two months to get that capex/maintenance/vacancy account moving.
Attorney · Clifton, NJ · Member since 2015 · 1k+ posts · 328 votes
8y
Have you spoken with a local mortgage officer yet Anthony? That would be a good place to start since it seems you'll be using leverage on the rental property. Most rentals require 20-25% down but there may be some programs available depending on who you speak with. They'll be able to get you a price range for what you qualify for. You can find some good brokers on the member section of this site.
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
@Anthony Marucci Bethlehem is, generally a lower priced area, so I would look into buying a small multi unit and living in one. That way you can take advantage of low down payment loans. $10k doesnt leave much left for reserves so I would only do it if you are also able to save a decent amount of your salary every month, just in case
Bethlehem PA (bethlehem, pa) · Member since 2018 · 11 posts · 2 votes
8y
@Dan Barli I haven’t spoken with anyone yet..I’m still very new and just trying to learn anything and everything I can and figuring out what to do. Thanks for the response! I’ll look into it.
Bethlehem PA (bethlehem, pa) · Member since 2018 · 11 posts · 2 votes
8y
@Jason DiClemente house hacking was my original plan but if I do that I will most likely wait 3-4 years. I was looking into being able to buy something to rent out before house hacking but I’m still trying to figure it all out..I’ve only been learning for 2 months at this point. I may be able to save closer to $15k by the summer but did want to save some just in case things went bad. I’ll definitely look more into all of the loan options and prices etc... thanks for your response!
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
@Anthony Marucci personally, I dont think $10k or even $15k, frankly, is enough to begin investing in a straight rental. You'll need at a bare minimum 15% down payment, plus reserves, just to get started. Not having enough reserves is a recipe for disaster
You should plan on 20% down, closing costs, legal etc. and probably another 10K in reserve funds.
You should probably spend more time studying finances, real estate and your local area to get a more complete education on investing. I would think you need much more knowledge before you proceed.
Bethlehem PA (bethlehem, pa) · Member since 2018 · 11 posts · 2 votes
8y
@Thomas S. I’m aware I need more knowledge, that’s why I’m here, to learn. I wouldn’t jump right into anything I’m just looking at different options and trying to figure out what would work and what wouldn’t. I’m taking any information I can get. I’ll still be learning for a good year or two most likely and then whatever else I can learn after that. Thanks for the response
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
8y
What's your current situation? Single? Married? Co-habitating with somebody? Full time employment? Renting?
There is no need to wait to house hack. 2-4 plex, 3.5% down with FHA loan. If you're renting, what is your rent? You can almost always improve your situation with a house hack of even a duplex. You said you might wait 3-4 years. In 3-4 year from now with a house hack today, you may have another 20% down to buy even more properties!
Also, I don't feel you have to have a ton saved for capex and the like right away. Get a home owners warranty for first 12 months on your house hack for any large expenses that come up, and treat the place like a true rental. i.e. If you're currently paying $1,000 a month rent, keep paying that amount, even if it's to yourself (the house hack account), and save quicker. Your tenants will pay at least 50-60% of your mortgage or more, and you continue on your current budget and savings rate for the expenses or vacancies that will happen.
Go to a bank, apply for a FHA mortgage, and then find a great realtor to show you around and look at some multi family homes. $200,000 multi family is easy to get into with $10k cash. Keep in mind, if you close on say the 2nd of the month, your mortgage won't be due for almost 60 days. In the meantime, you'll get that first months rent (prorated from seller), and that 2nd months rent from tenant, without any rent or mortgage payment from yourself. So, sock away all that money and then some in your first two months to get that capex/maintenance/vacancy account moving.
Rental Property Investor · Cincinnati OH · Member since 2018 · 39 posts · 31 votes
8y
@Anthony Wick Great example that is literally what I am doing now! I am getting into my first property in Cincinnati and am currently working with a Realtor to find the right one. I am considering going with a VA loan. The only thing is USAA is telling me there is a 2.5% funding fee for this type of loan. Not sure I like all that money not going toward the principle.
Considering FHA but a but concerned about the property requirement/code changes they may disqualify more affordable older housing. Any comments are greatly appreciated thank you!
Boca Raton, FL · Member since 2017 · 29 posts · 8 votes
8y
@Anthony Wick Nailed it. I don't know if you currently have rent expenses or whatever it may be. But your best bet is to house hack a du/tri/or quad-plex. Get in there with an FHA loan 3.5% down. After you are living for free or almost living for free you can begin to plan your next move.
Investor · Riverside, CA · Member since 2014 · 239 posts · 177 votes
8y
@Anthony Marucci man I couldn’t agree more with @Anthony Wick. That’s precisely what I did with my fiancé. Everyone bank accounts are at different levels and if we would have waited to save 20% and have a million in reserves etc we’d still be sitting on the sidelines to this day. We bought a $189k property for $7500 down, drained everything we had and did It. Was It Scary? Hell Yea. Was It Worth It? Oh Hell Yea it was! Four years later and we wouldnt be nearly where we are today if we hadnt made such a scary sacrIfIce
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
8y
Keep in mind, FHA loans are dependent upon county on how much you can qualify for. In some areas like California and Denver, that might matter. I know OP was from Bethlehem, PA, which I am not familiar with. Also, FHA loan does come with MIP (PMI), that NEVER goes away. You'll have to refinance into a conventional loan once you hit 75-80% LTV to get rid of that payment.
New York, NY · Member since 2017 · 22 posts · 2 votes
8y
@Anthony Marucci I suggest you get as much information as possible before going into anything. Look at the properties in your area and calculate all the numbers to see what you will need for a good down payment, and reserves just in case something comes up. I would say a good $20-25k would be good, as long as the house is not above your budget. It will go a lot smoother for you, if you have all your numbers calculated so that nothing pops up and surprises you.
Lender · USA · Member since 2013 · 186 posts · 97 votes
8y
@Anthony Marucci If the goal is to minimize your out of pocket cost while you are learning I would consider learning how to effectively wholesale.
Some investors and realtors look down on wholesaling and just like any other real estate strategy it has its pros and cons. However in my opinion for learning and keeping your investment little to no money down it's a worthy consideration.
Wholesaling done correctly and legally could accomplish exactly what you are looking for.
Keep in mind, FHA loans are dependent upon county on how much you can qualify for. In some areas like California and Denver, that might matter. I know OP was from Bethlehem, PA, which I am not familiar with. Also, FHA loan does come with MIP (PMI), that NEVER goes away. You'll have to refinance into a conventional loan once you hit 75-80% LTV to get rid of that payment.
I'm not completely familiar with how this works with the mip. Could he not re appraise the property if he had enough forced appreciation or pay down to 80%? Is this completly different from a conventional in that sense?
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
8y
@Daniel Dawson The days of reappraising an FHA after 20% equity and doing away with MIP are long gone. MIP never goes away now. Yes, that 3.5% down payment is amazing, but if you can boost it up to 5% and get a conventional mortgage, then you get to do away with PMI after proving you have 20% equity (I believe some mortgage lenders require 25% equity to dump PMI).
Rental Property Investor · Ankeny, IA · Member since 2017 · 2k+ posts · 3k+ votes
8y
@Kevin Zolea I'm a believer in good debt vs bad debt. I also think some people wait too long to invest or house hack. Always do your own math! Credit cards? Always always always the top priority to pay off first. Even those zero interest CC's can come back and haunt you. Student loans? What is the percentage rate? I keep reading on BP that people want to pay them off first. If they are at 4-6%, you can certainly make a bigger return in real estate. Car loans? Pfft...low interest (as a caveat, never buy a new car, even at 0% interest. Just a bad buy).
Now, after I said all that, zero debt can be mentally freeing. I've been at zero debt. I've had student loan debt. I've had credit card debt. I've been buried in debt when young. Now? I'll take all the mortgages I can get at 4-6% to buy more rental properties. But my CC debt is at $0 at the end of every month.
Investor · Riverside, CA · Member since 2014 · 239 posts · 177 votes
8y
@Aline Bender I know I wasn’t asked but I might as well chime in. As for reserves, I like to keep 6 months worth of TOTAL bills, capex, utilities etc per property in savings.
Rental Property Investor · Collingswood, NJ · Member since 2016 · 282 posts · 116 votes
8y
@Anthony Wick I completely agree with you! I just graduated college but luckily I don't have any student debt. I have some debt in credit cards, which is what I am trying to eliminate before I get into real estate. I would not have any second thoughts of going into a mortgage if the numbers work!
Investor · The Creek, WV · Member since 2014 · 890 posts · 1k+ votes
8y
@Anthony Marucci Look for properties that cost $40k or less. Find you a local bank and meet with them to see what your options are. Heck, I sometimes buy houses outright for less than $10,000. I've bought two houses in the last year for $7,000 each and did around $3k worth of work to them to get them ready to rent. Start wherever you can. A lot of these people on here from the coastal areas will snub their noses at these cheap properties but you can find some pretty good homes for less than $20k. Take out a personal loan if you can't get an actual mortgage. For reserves, shoot, I used credit cards when I first started out.
Also Lowes and Home Depot will both give you a LOC I'm sure. That's a huge help when starting out and strapped for cash. Feel free to reach out anytime. I have pics and videos of these cheap homes I have purchased and all of them are currently rented out making me money.
Bethlehem PA (bethlehem, pa) · Member since 2018 · 11 posts · 2 votes
8y
@Derrick E. Thanks for the response! Haven’t seen many people who talk about the cheapest properties so it’s cool to hear that’s what you’ve worked with.