Rental Property Investor · Plainville, CT · Member since 2021 · 3 posts · 0 votes
I’m a 22 year old Union Carpenter who is looking to start his real estate journey. I’m stuck between on which loan type should I use on my first investment property.
I have enough funds saved up to put down 20% for properties under $250k, but after the down payment I'd only have little left for reserves in the bank. I'd still have the FHA loan in my back pocket when it's time to purchase my second property.
If I started with the FHA loan, I'd have more reserves ready for any emergencies but will have to start saving again until I reach a comfortable amount to start investing some more.
I’d also be looking forward to living in the unit to gain some on site landlord experience. Moving back in to my parents house is always another option if things get rough.
I'm thinking more towards the FHA loan but don't know which to start off with. After months of listening to bigger pockets and reading real estate books, I'm just an young investor planning on starting to start his journey in real estate. Any feedback or comments would be greatly appreciated!
Realtor · Wake County, NC · Member since 2019 · 77 posts · 60 votes
5y
@Justo Martinez what is your target investment? If you are looking at a duplex, triplex or quad, I would definitely utilize that fha to ensure a 3.5% down payment IF you plan on living there, if you run your numbers right and put some sweat equity into the property, the cash flow could provide a sufficient return that will allow you to earn that money you invested back in no time. Single family home? Conventional route is the way to go, you can still do a low down payment (as low as 3%) if you plan on living there and renting out the rooms!
Insufficient funds is the hardest part about starting out, I am running into the same problems but what’s worse is never starting, so get out there and it will all work out!
Banker · Nationwide · Member since 2020 · 2k+ posts · 1k+ votes
5y
If you have good credit and can put 10-20% down conventional is the best route to avoid higher MIP (monthly mortgage insurance premiums). If your credit is under 700 than FHA would be the better choice and allowing you to put down the 3.5% to help save funds. Keep in mind once you buy a home you can always take out a HELOC to recoup some of the costs associated with the down payment or for renovations. After 6 months on title you can also take out cash with a cash out refinance. FHA require (12 months) owner occupancy while conventional really has no required rule that it mandates as strictly as FHA.
Rental Property Investor · Plainville, CT · Member since 2021 · 3 posts · 0 votes
5y
@Joseph Gisler I appreciate your feedback! Preferably I'm looking into a duplex or triplex to maximize my cash flow. Seems like FHA is the perfect route for me to take. I don't want to regret never starting so my goal is to purchase something before I turn 23!
Rental Property Investor · Plainville, CT · Member since 2021 · 3 posts · 0 votes
5y
@Jason Wray Thank you for your feedback! My credit is above 700 but with a FHA I don't think I could avoid those extra insurance payments. When a opportunity comes my way to use a conventional loan, I'll keep your tips in mind!