First Time Home Buyer

21 Replies

Hello all,

I was hoping I can get some advice from you awesome people. So my finacee and I are looking to buy a home (duplex, condo, single family) by February of 2021. We are tired of renting and are ready to get our investing careers going. We live in San Diego, CA and would be able to put down 11k-13k down. With such a small amount for a down payment for California we are probably going to look into an FHA loan. I have a few questions for you all:

  1. 1. Is it a good time to buy in the market right now or should we wait to start looking in 2021?
  2. 2. Do you recommend finding a loan with a credit union, big bank, seller finance, etc?
  3. 3. Since we are looking for a home in San Diego County does it make more sense to get a single family or condo? It is hard to find a duplex and it is super expensive. 
  4. 4. Should we get a real estate agent? If so, is it easy to find a real estate agent who is also an investor?
  5. 5. We have good credit scores (740+), but we lack the employment history due to recently graduating college; will this be an issue?
  6. 6. What is your best advice to us on getting started in our investing career? 

Any advice helps and I want to thank you all in advance for taking the time to read this post. Happy Friday and have a great weekend.  

    Originally posted by @Andres Andrade :

    Hello all,

    I was hoping I can get some advice from you awesome people. So my finacee and I are looking to buy a home (duplex, condo, single family) by February of 2021. We are tired of renting and are ready to get our investing careers going. We live in San Diego, CA and would be able to put down 11k-13k down. With such a small amount for a down payment for California we are probably going to look into an FHA loan. I have a few questions for you all:

    1. 1. Is it a good time to buy in the market right now or should we wait to start looking in 2021?
    2. 2. Do you recommend finding a loan with a credit union, big bank, seller finance, etc?
    3. 3. Since we are looking for a home in San Diego County does it make more sense to get a single family or condo? It is hard to find a duplex and it is super expensive. 
    4. 4. Should we get a real estate agent? If so, is it easy to find a real estate agent who is also an investor? 
    5. 5. We have good credit scores (740+), but we lack the employment history due to recently graduating college; will this be an issue?
    6. 6. What is your best advice to us on getting started in our investing career? 

    Any advice helps and I want to thank you all in advance for taking the time to read this post. Happy Friday and have a great weekend.  

      1. I personally an expecting a decline in values within a year, but so far the market has behaved as though I know nothing.  in reality, no one knows.  What I do know is that timing the market is not easy and historically the market has increased over the long term.  We are still looking to purchase (3 offers since COVID), but are proceeding cautiously.
      2. With the interest rates so low and you being owner occupied (OO) which means potentially high LTV, I see little to gain with owner financing. If you were not OO, there sometimes is an advantage if the owner is willing to finance at higher LTV than could otherwise be obtained. If you plan on investing in RE for the long haul, I suggest using a mortgage broker. The contacts could prove helpful in the long run. Many times they have more loan options.
      3. My ordering would be detached duplex, SFH, condo. Duplex because house hacking helps in reducing your costs. A percentage of the rent for the other unit counts toward qualifying for the loan so this would allow you to purchase the highest value. Condo is last because of the power of condo HOAs. I like to be in control of my investments. HOAs can restrict STR or even LTR. They can dictate the type of flooring.
      4. Why would you not get an RE agent?  The seller pays the commission.  As a newbie you can only benefit from someone looking after you. 
      5. I suspect short employment history could be an issue.  One of the first things I recommend is finding out what financing you qualify for.  I suspect if you had an agent, they would be providing similar guidance.
      6. I personally think the best option is to combine house hacking a detached duplex with a BRRRR. The advantage of the duplex has already been discussed. The BRRRR is to help with the initial poor cash flow. Most San Diego RE has negative cash flow. This is much easier to handle if you have added tens of thousands of dollars of sweat equity shortly after purchase. Note $10K of sweat equity equates to many months of cash flow in most units in the US.

      I have couple of last comments: 

      • cash flow is the cash flow over the hold period.  It is not the initial cash flow.  Often it is not closely related to the initial cash flow.
      • cash flow is only one of quite a few RE profit sources.  We have great cash flow in San Diego, but it is no where near our top profit source.  Every one of our RE have increased at least $1k/month over the holding period and our oldest was purchased in 1993.

      Good luck

      @Andres Andrade

      I guess the biggest suggestion would be what your investing strategy is... 

      1. If you're planning on buying and never letting go then time in the market is better than timing the market. If you plan on live in flipping or something of that nature then yes the market dropping in the near future is a concern.

      2. Whatever lender will give you the best rate, in my opinion

      3. House hacking "might" be the best path forward. 2b(3b)/2b anything around 300k if you're doing an FHA with the down payment you said above. Having a renter with a 2b/2b condo I cut my mortgage sum of fees (including HOA) about in half.

      4. Definitely  agree with Dan, a solid real estate agent is more than worth their fees... paid by the seller. I know some good agents if you want me to make the introduction.

      5. Agreeing with Dan again, your credit score is perfectly fine, employment might be an issue... How long have you been working? At least 6 months? You can also work with a lender on this. If you do wait until Feb then you'll have another 6 months of employment history

      6. Like point one, depends on your strategy. If you're buy and never let go then time in the market beats timing the market. If you're looking for shorter term live in flip then I'd snag a solid investor friendly real estate agent

      @Andres Andrade

      Most banks need 2 year work history, unless you were a student directly prior which they’d consider that part of your employment time-clock as long as you’re getting a job in the same field as your major. Example: if you spent 4 years in college as an engineering major, then graduate and get a job as an engineer and have only been working 3 months, then the bank would view your work history as 4yrs 3mo.

      @Dan Heuschele Dan thank y out so much for your thorough rely. This really gave me a lot of insight and got me thinking about things I wasn’t considering. I appreciate you taking time out of your day to reply.

      Interesting, I never knew that the seller would pay for MY real estate agent? Is that something you work out with the seller or is it a known fact?

      Also, I forgot to mention; my fiancée and I are finishing of paying some loans. We have about 40K left to pay off. Is it smart to pay off those student loans and then purchase a property? What is your take?

      Thank you.

      @Trevor Haney

      Trevor thank you so much for taking time out of your day to reply. Super helpful and good information.

      Our plan is to hold our property for a long time. We would live in it for at least one year and then rent it out.

      I had no clue that the seller will pay for my real estate agent? So ultimately, what would I be paying as the buyer? Down payment + fees?

      So I got my degree in construction management. Worked with a general contractor for 1 year and now working with a real estate development services company.

      Yes, once I start looking to buy I would love to get in contact with one of your well known agents. Thank you!!

      My last question would be about debt. My fiancée and I are in 40k student loan debt. Is it smart to be debt free before we buy a property. It is looking like we can pay that 40k off by the beginning of 2022. What is your take?

      Thank you!

      Originally posted by @Andres Andrade :

      @Dan Heuschele Dan thank y out so much for your thorough rely. This really gave me a lot of insight and got me thinking about things I wasn’t considering. I appreciate you taking time out of your day to reply.

      Interesting, I never knew that the seller would pay for MY real estate agent? Is that something you work out with the seller or is it a known fact?

      Also, I forgot to mention; my fiancée and I are finishing of paying some loans. We have about 40K left to pay off. Is it smart to pay off those student loans and then purchase a property? What is your take?

      Thank you.

       > I never knew that the seller would pay for MY real estate agent? Is that something you work out with the seller or is it a known fact?

      It is known.  The seller had a real estate commission in the agreement   The seller’s real estate agent covers the buyer’s agent fees out of that commission.   It is in the selling agent’s best interest for the split to the buyer’s agent to be equitable otherwise buying agents are less likely to bring their buyers to view the property.

      Typically, if you show up without an agent, the seller’s agent gets both commissions.   Great for the selling agent, but as a new buyer you want someone looking after you.  In addition, many properties are viewable via lockbox that the agents have access.  Without an agent it is harder to view properties.

      Your next steps should be to get pre qualified so you know finance options and what you can afford and get an agent. The agent should know your price range and what you are looking for. They can set MLS query parameters and email you the matching MLS properties.

      Good luck

      @Andres Andrade

      1) Generally speaking, best time to buy is when you can afford to. Unless you're doing a quick turn around fix n flip you can't lose at the buy, you can only lose when you sell. RE has always gone up over time. Think Supply and Demand. Appreciation generally is a given in a low inventory, highly desirable area to live w/ a great job market.

      2) Go w/ an experienced Broker who can close on time. I can refer multiple if you need. 

      3) Agree w/ Dan. DET Duplex then SFR w/ value add opportunity, or Condo.

      4) 99% of the time seller pays commission. Technically, the commission goes to the listing brokerage and is split between buyer's agents brokerage "selling brokerage." Most agents who consistently post on these forums all have investing experience and will take care of you. 

      5) Speak w/ your lender or broker. The information is free. If you're unable to get pre-approved or pre-qualified they'll set you on the path. Have the conversation.

      6) Surround yourself w/ good people, do your research, but not too much. Analysis paralysis will prevent you from taking action. 
       

      @Maxwell Ventura

      That is all great information to know. Thank you for that Maxwell and thank you for taking time to reply.

      Yeah, I’m definitely looking to start talking to a lender or brokers. You have any good recommendations for lenders or brokers? I’m looking to get pre-approved and see what my options are.

      Also, what is your take on debt? Should We pay off the 40k debt we have before purchasing property?

      Thank you!

      @Andres Andrade

      For the real estate agent, @Donald E Appleberry can get you hooked up when you're ready. I met Cody (agent for my last purchase) through Donald and Cody waited like 8 months until I was ready to purchase.

      As for the student loans,I'd say it's a matter of preference. I, personally, am not one to pass up an opportunity when it presents itself. I'd make sure you have your cash reserves built then passively look for your first purchase, being selective, extra picky, and clear with your agent so you save time for yourself and the agent. While you're passively looking at potential purchases, focus on paying down your debts, student loans, car loans, etc. Then when you finally make that purchase you can just adjust your finances for the mortgage.

      @Andres Andrade @Trevor Haney

      Thanks for the shout out Trevor!

      All of the information and advice that's been given pretty much hit the nail on the head. Not going to beat a dead horse. Wavetops of my thoughts on the market is - I wouldn't be surprised if there is roughly a 5% softening in the market. Real Estate usually lags behind about 8-10 months. With that being said its going to depend on where you're looking to purchase. Some areas have had a 6% appreciation over the course of a year. Timing the market isn't a good practice either. With the info you have above and the people who already commented (I know most of them) you're in good company. The best bet would be to decide between yourselves if this is a step you're ready to take. If so, then start the discussion with a lender, find an agent you trust and mesh well with and go check out different areas to find the one that feels right. Congrats on graduating and best of luck to you! I can provide some points of contacts if you'd like or just some casual conversation about the different micro markets throughout San Diego. 

      All the best!

      @Andres Andrade

      First question is anyone’s guess....and everyone will guess....it will never feel like a great time to buy.

      Definitely work with a broker, not a big bank.

      I just closed on a duplex a week ago for an fha buyer with just slightly more funds than yourself. Finding a great duplex is possible even with fha loan in this market.

      Definitely helps to work with someone who is also a local investor.

      Getting preapproved if you are just graduating is totally possible, I can share the contact of a loan broker that can get you preapproved. Message me if interested.

      Be patient and buy a duplex if you can qualify, otherwise buy what you can qualify for to get started.

      Best of luck

      @Trevor Haney

      Thank you. I appreciate you taking time out of your day to comment and give some advice. I’ll be sure to message Donald.

      Also, what is I have an agent and I’m super picky and descriptive, but then I don’t end up buying any property? Is that frowned upon and does it screw over my agent. I’m just curious since I’ve never gone through this process.

      @Andres Andrade  

      Happy to help! For the agent thing I probably had some typos. I was referring to agents work of commission so being clear on your intentions can save both you and the agent time and effort. For example, if you just tell an agent I'm looking for a 2 bed/2 bath townhouse in the San Diego area then the agent is going to pull everything that fits your criteria. But in your case since you and you're fiance plan on paying off student loans while you wait for a deal then you can be very specific on the deal you want; example: townhouse/home in college west area, 2+ bed/2+ bath, no more than 350k, washer/dryer in unit, etc. The agent can have a query saved for your preferences and send you listing weekly (for instance) and then if you two find a deal you guys like, you can inform the agent and they'll set up a showing.

      Being picky isn't a bad thing. You're purchasing a home and it's probably one of if not the biggest purchase of your life. If an agent is mad because you're picky then clearly your best interest isn't their priority. With that being said, the thing that I see that upsets agents the most is a client being unrealistic, "wishy-washy?" or impractical on what they want. Not a popular conversation agents will have with their clients, but being as transparent as possible that's what I've reflected my frustrations to be. There may need to be compromises made to make a deal happen, but every client and person is different. It takes looking around and experiencing the market to fully realize what it is you want, so it's all part of the process!

      Originally posted by @Trevor Haney :

      @Andres Andrade  

      Happy to help! For the agent thing I probably had some typos. I was referring to agents work of commission so being clear on your intentions can save both you and the agent time and effort. For example, if you just tell an agent I'm looking for a 2 bed/2 bath townhouse in the San Diego area then the agent is going to pull everything that fits your criteria. But in your case since you and you're fiance plan on paying off student loans while you wait for a deal then you can be very specific on the deal you want; example: townhouse/home in college west area, 2+ bed/2+ bath, no more than 350k, washer/dryer in unit, etc. The agent can have a query saved for your preferences and send you listing weekly (for instance) and then if you two find a deal you guys like, you can inform the agent and they'll set up a showing.

      >The agent can have a query saved for your preferences and send you listing weekly (for instance) and then if you two find a deal you guys like, you can inform the agent and they'll set up a showing.

      I recognize he was just posting a "for instance" but the OP is a newby. Get the listings sent daily. The best deals go fast, especially in the entry level market. If you get them sent weekly, I suspect at least the 10% of best entry level deals will have offers and likely more. RE agents could provide a more accurate percentage of what percentage of entry level listings get their initial offer in the first week (DOM less than 7 days for initial offer). Once you are seriously in the market, you want the email daily and you want to look at it daily.

      Good luck