First time buyer, in the Los Angeles area. Looking at a Triplex costing $670K 5bd 3bth. I am super nervous to pull the trigger because I'd have to use all of my savings for the down payment. I have who to loan me a bit more cash for reserves, but I am wondering if this is too risky?
2- 2 bedroom 1 Bath
1- 1 bedrooom 1 Bath
If you need all savings for the down payment, what are you going to do about getting it inspected? How about repairs? For a rental, you can expect to deal with a good amount of repairs early on and you will need to have some funds in reserve for those. I don't know who you would borrow the reserves from, but expect at least an 80% that they might back out on you if you really need it.
For me, the risk level would be too high with that kind of setup.
I think you should look at the numbers whether its a duplex, triplex, or quad. If you know that the units will all be vacant at purchase, and you can rent out two of the three that covers either all, a majority or if possible, cash flow from it then you can live for free in the third. If you can justify paying for some of the mortgage living in the third because its cheaper than renting than that would also be a worthy choice.
Make sure your numbers include all hard and soft costs, and that you have money still left in the bank for unexpected occurrences in construction.
It is always risky and not very wise to use up all your capital reserves, this over leveraging. That said, it is impossible for us to give any other specific answers with the little info you provided. The gross rents, expenses, debt service, repairs, capital expenses, and ARV are all important numbers to know to better judge the assets value.
Thank you all for your feedback!