Rental Property Investor · Buffalo, NY · Member since 2019 · 43 posts · 9 votes
I’m young, I’m only 18 but I want to get started with investing into multi-families.
One of my main concerns is the loan, I don’t have any knowledge on loans. I have a few questions, so please if you know anything about these loans and the terms of them please reply.
- do you need a credit score ? If so what’s the typical range you recommend..
- Is this loan going to be the amount of the unit I choose? As like if I were to be buying it..
- what’s the recommended % I put down on the loan?
43% DTC(Debt-to-income) Ratio - your monthly debt may not exceed 43% of your monthly income
required downpayment 3.5% of purchase price
75% of annual gross cashflow can be claimed as annual income.
payment includes Principal, interest, taxes, insurance & PMI
There are so many variables but that is simply the basics of the FHA Loan. There is also a FHA 203(k) loan that is the exact same except they loan you money for the renovation as well. I hope that helps
So the buffalo market for 2+ units is not “hot” right now. It actually has gone down the past year and a half from the peak. And in June when the new tax assessment kicks in you’ll see more houses available than average which will also lower the price.
Hears the deal. Your young, probably don’t have a lot of money, and more than likely don’t have a decent credit score because your young.
Find a double. A decent one. You don’t have to buy a piece of **** and dump a butt load of money in it to make it cashflow. Because where are you getting that money to rehab? You’d actually make out better buying a more complete house right now than rehab. I personally won’t touch a rehab over 25k. Anyways target a property in a neighborhood your comfortable living in. Pick a house and buy it. See if your parents will “split “ it with you. See if the bank will let you do fha. House hack it. Move into the worst unit. Rent out the other. Get some roommates and collect. Or have no roommates and have the rented unit pay your mortgage. No your living rent free. Take what you would have paid in rent and save it each month. It’s going to take some time but before you know it you’ll have a nice downpayment. But then you refi your house to conventional and go house hack another one. And then another. Your young enough that you can do this every couple of years. After 3 houses you’ll be set.
Don’t be scared of the mls.
This whole buffalo is hot , doubles are hot, etc is bs. Do the math and make offers.
@Joe Aquilina hey Joe don’t forget about reserve requirements for a small multi-family. Usually the lender wants to see that you have 3-4 months of expenses in savings to cover vacancy and other hard to predict scenarios.
My Advice would be to dive in. Read the top 5-10 books on multi family investing so you have a good foundation and go in with the mentality that the answers to all of your questions are just waiting for you to find them! Join the local investor Facebook groups and go to meetups ready to learn. Find an investor friendly realtor to help you with your search.
@Joe Aquilina Reach out to one of the reputable lenders that are active on the forums that operate in your area and ask them the same questions you posted on here. They should be able to breakdown these things down very easily for you.
Hi Adam, I have not completed my first deal yet so I may being more conservative than yourself. It also depends on what numbers were utilizing in the calculations.
I’ve been searching in the suburbs, Cheektowaga and the south towns mostly.
Your welcome. The following link is from a reputable source. Use this for all your Low down payment questions including up to date available mortgage rates etc. Good Luck !
Thank you for showing initiative and a willingness to learn! An FHA househack could be a solid option as long as it shows long-term buy-and-hold stability in the numbers for when you leave (have to live there for at least a year, of course). Just getting your mortgage paid every month only leaves you with $700/month at the end of the year if you leave by the sound of it, and that's not going to go far. Be sure to really crunch the numbers and be sure it not only makes sense while you're living there but long after you buy the next one (you can get very favorable loans if you keep buying as an owner-occupant and living there for a year).
@Devon Keaveny It just helps build your credit much quicker and shows you aren't borrowing more than you can handle. Basically you want to show that you can borrow and pay back in a timely manner. Its recommended you use less than 30%, and pay your statement in full when it is generated at the end of every month. Obviously its harder to pay in full when you take on more expenses throughout your life (mortgages, auto loans, car insurance, student loans, groceries, child and pet care, etc etc etc), but its a great way to build strong borrowing habits while you're younger and don't have tons of expenses. For instance, if you are allotted a 2,000 limit on your first card, you should shoot for using no more than 600 per month. I personally tried to stay under 200 per month, because its an easier number to repay at the end of the month without carrying a balance, that will carry over to next months payment etc (its really easy to let your debt build up this way!). So I purposefully only used my first credit card for gas purchases, or small expenses like chinese takeout, and would stay under that 200 dollars per month. As I mentioned before, just doing this for a few months brought my score from 680 (only had a debit card and a few student loan accounts I wasnt even paying off yet) to a 740. JUST because I used a tiny bit of credit. Now, there wont be that big of a jump if you already have a credit card, but I went from having no credit history to having a good credit score and able to get a good rate on a mortgage.
@Devon Keaveny additionally, I'm not sure if I can share outside websites (?) But for young people interested in getting into real estate who need to start learning about frugality and the ins and outs of general finance, I always use Nerd Wallet (a website) to look for the best reviews on things like savings accounts or credit card reviews, they are great with explaining personal finance. Additionally, Clark Howard is another resource for financial questions (he has a podcast and a website)