Hey guys, I’ve been doing tons of research the last few months and eager to get into this real estate hustle/life style.
Now I’ve finally found a property I believe to be THE ONE, my potential first investment.
Duplex with little to no repairs needed, price = 110k and each unit is being rented for 740/mo. Now here is my question, the bank I’m seeking a loan from requires a 25% down payment and the issue is... that’s almost all of my savings! If I put a 25% down payment, after closing costs and all, I’ll have about 3,000 left to my name. The perks of this would be low interest rate and higher cash flow but at the cost of wiping out my savings. Do you all think I should pursue the property in this manner or through a private money lender at the cost of a much much higher interest rate and less cash flow.
Extra backstory: I am currently a young buck living at home with no rent and pretty much no bills to pay besides the living essentials, so being left with 3k to my name isn’t much of a concern. My only concern is that such a situation may severely limit my investing future in the short term.
Any help/advice/insight is greatly appreciated, thank you!
Hey @Brian Puebla , interesting situation. i can kinda relate as a fellow young buck! If you decide to house hack the duplex (live in one unit and rent the other(s). Then the bank would more than likely give you better terms (little hazy on this but i think lower % down or interest rate if you do ). Then hopefully it'd be a even better deal which id suggest using your own capital for the house (even if you didn't househack). Now at the moment my partner and i are trying to find out how to afford a deal given we don't have more than 6K combined in savings and we live in Socal So logically we thought private money and looking farther into it it can cost alot more in terms of money to try and save your bank account than to actually just buy it using your bank account. A few reasons are there are what i believe "points" which correlate to fees with private money lenders (in the 1000's most of the time before you even have the loan amount. The other thing id look out for is will the loan affect your credit at all (especially if its good right now) and whats the interest payment look like on said house with a private money lenders 10%-15% interest rates. Could you afford it? Would it take most of your income and savings away? But being a newbie (studying for 6-9 months now) i believe in my limited expertise that you should use your own money. Sounds like you got a pretty good deal going on right now and your able to make quite an income with your current job with minimal monthly expenses i presume so a mortgage payment that you can afford (do the math beforehand ) wouldn't be the end of the world for your income especially if you had BOTH places rented out. Just be cautious if a repair is needed can you use credit cards or some other form of funding to pay it off and the mortgage at the same time Do the math and the due diligence That's my 2 cents on the subject nut like i said do your due diligence!!!!. Lemme know if i confused you anywhere i know this is a long response. Hope i helped!!!!!
Hmmm interesting input! Thank you for the advice and your time. I was thinking similarly actually, but not for the house hacking (yet) because I currently live at home, rent free, so the extra expense doesn’t seem to be worth saving in interest costs AND the duplex is 4 hours away from me so I’d need to find a new job and all haha
@Brian Puebla oh yeah i completely glazed over that! lol Hope i helped!
If this is really a good deal (and make absolutely sure of that) I'd use my own money as the return on it will be much better than the bank. Remember you don't pay taxes on money you save. Then I'd scrimp and save like crazy to build up a larger emergency fund.
One question, do you have any other available resources in case something expensive needs to be fixed at the property? ie, in 4 months you need a new HVAC or roof work? By resources, I mean family, friends, associates, etc that would float you a short term loan.
If you have no expenses because you are still living with your parents, then why not go for it. Make sure you have funds to cover repairs, taxes and vacancy.