Financing a multi-family
Hi, I'm 20 years old and I'm currently living with my parents. I was looking into buying a duplex and living in one side and renting out the other. I was approved for a FHA loan and I have about 20k saved up but that's still not nearly enough for anything in my area. Anyone have any idea how I can get more money or where I can invest it in the meantime, thanks.
Quote from @Victor Tofilski:
Hi, I'm 20 years old and I'm currently living with my parents. I was looking into buying a duplex and living in one side and renting out the other. I was approved for a FHA loan and I have about 20k saved up but that's still not nearly enough for anything in my area. Anyone have any idea how I can get more money or where I can invest it in the meantime, thanks.
Housing isn't going to get any cheaper. Figure out how to increase your income and set more aside. Get a second job at McDonalds for $15 an hour. Work 20 hours a week and save it all while continuing to save like you've currently done. You could double your savings in under ten months. Rent your car using Turo and ride a bike to work. Sell your car and ride a bike. If you have extra space where you're currently living, rent it out as storage. Deliver food for DoorDash or drive for Lyft/Uber. Stop eating out, drinking, smoking, drinking $5 lattes, or whatever is wasting your money and tighten your budget. Buy items on classifieds for cheap and resell them for a profit.
You can't do what everyone else does and expect to get ahead. Live like no one else today so you can live like no one else tomorrow. An employee of mine picked up a second job waiting tables for two five-hour shifts on the weekends and she got on a budget. She made about $1,000 a month as a waitress and saved enough in one year for a down payment on her first home, a simple townhouse. She was single, so she rented out the basement for extra income and kept waiting tables to save more. It's been six years and she now has a large single-family home on land (she covers the mortgage by renting out rooms), a nice fourplex, a nice office building (she occupies a large office and rents out other spaces), and a brand-new Ford F150. Six years ago she was in an apartment with a net worth of about $20,000. Today she is creeping up on $1 million in net worth and her income is probably 4x what it was working for me.
Nobody controls your future but you.
Hmmm, not saying you don't live in a super high cost area, but wondering why the $20,000.00 that you have isn't enough to buy a duplex in your area? If you are only covering the down payment with the $20,000.00 that would mean that your loan amount is $571,428.00 and with the additional $20K down this would put your max. purchase price at $591,428.00. Can you not get a Duplex in your area for that?
You can also negotiate that the seller pay all your closing costs, typically about $6-$7,000 if you are not buying the rate down. You could also request the seller pay your closing costs including a rate buy down, discount points?
is it more expensive than that in your area for a duplex?
I hope that helps?
https://podcasts.apple.com/us/..https://podcasts.apple.com/us/...
I would listen to this episode. Especially for first time home buyers…. There are options.
@Victor Tofilski, I am certainly one that has preached about "the fastest way out of real estate is to be under capitalized going in". That being said, as Kevin mentioned, 20k down on an FHA loan, assuming you qualify for 3.5% down payment, is a very large loan amount.
Even subtracting $5k for various costs and prepaid, you still have a loan balance of $428k.
If you want in, you buy where you can afford. I just searched Zillow and found 2 duplexes in Ann Arbor for $385k and $490k. Ypsilanti has several more, all under $350k. My first house wasn't in a bad area, but it wasn't my top choice, but it was what I could afford and got me started.
Beyond that, as Nathan mentioned, you hustle more. Second and third job. Sleep is optional at your age. ;) Personally, in college, I was able to work 40 hrs (thankfully I had a flexible job) and remain at the top of the semester hours where I would have had to pay more to take more classes beyond full time. But getting into a duplex, renting the other half, and having a roommate, you can save even more because you will likely have little to no out of pocket costs, versus renting elsewhere. But again, you likely can't buy in your "best choice" area.
Quote from @Victor Tofilski:I suggest not starting with a duplex. Buy a house and rent out rooms. You can't be more ready than single, $20k in your pocket, and pre-approved for an FHA loan.
Hi, I'm 20 years old and I'm currently living with my parents. I was looking into buying a duplex and living in one side and renting out the other. I was approved for a FHA loan and I have about 20k saved up but that's still not nearly enough for anything in my area. Anyone have any idea how I can get more money or where I can invest it in the meantime, thanks.
@Nathan G. Thats some hard-core Dave Ramsey teaching. Preach it, am with you.
@Victor Tofilski Looking at Zillow is see duplexes Ann Arbor running from 370k-1.5M. Ann Arbor is a pricey market, probably due to the the college. Given the down payment you have already saved you could probably qualify for one of the more affordable duplexes, the one for 370k had very nice pictures but I don't know the neighborhood.
My guess is the higher priced units are close to campus. If that is the market you are going for you might have to get some roommates as well as renting out the other unit. The challenge here will be qualifying for the loan payment. You many have to pump up your income to qualify for the loan you want/need or find a co-signer.
If you have not already done so you need to 1) reach out to an agent and get a listing alert, be prepared to make an offer same day, you can always pull your offer if the property does not pass inspection. 2) you will also need to find a loan officer or mortgage broker to get prequalified for a loan. the market is still very hot right now so when you make an offer you have to have everything ready to go.
Lastly, you might want to look at an alternate market. Ypsilanti is right next door and the price point there is quite a bit less.
Other strategies to help land a deal. Get prequalified and reach out to the listing agent directly and ask if they have any other properties listed or coming up. Call property managers in the are, most are also realtors, and ask if they have any investors looking to sell.
Lastly, you have a decent down payment, see if the seller will consider offering seller financing to spread out their gains and maintain a monthly cash flow.
Quote from @Victor Tofilski:
Hi, I'm 20 years old and I'm currently living with my parents. I was looking into buying a duplex and living in one side and renting out the other. I was approved for a FHA loan and I have about 20k saved up but that's still not nearly enough for anything in my area. Anyone have any idea how I can get more money or where I can invest it in the meantime, thanks.
Hey Victor, I'm an agent with a focus on investing, based in Ypsilanti. I'd be happy to help you find the best investment you can afford. Hit me up if you're still looking :-)