What to think anout when buying your first rental

Question

In the process of looking /buying a property.

Wanting some input on the idea of buying said rental and living in it for a short time only to rent it afterwards .

I don’t have 20% for a down payment

Thoughts ?

Todd Turberville · Answer

@Nathan G.

Yeah Nathan that seems like the plan I’m gonna have to do. As of now I bought and flipped my first house 8 months ago and paid off all debt.

Now I’m living in an apartment and like you said the Morgage company I talked to locally said since I don’t own a home , and it would be considered an “ investment property” I would have to put 20% down .

Otherwise commit fraud and call it my “ primary residence” when it’s not  lol

Theresa Harris · Answer

Explain to her what the plan is and that you are not buying your forever home, but a rental that will help get you started. Is the property going to be in both of your names, or just yours?

Todd Turberville · Answer

@Theresa Harris

Good input!

Yeah my only worry is my fiancé getting attached to it lol I know i won’t !

Todd Turberville · Answer

@Aigo Pyles

Ahh

I bought my first house and flipped it about 8 months ago .

Todd Turberville · Answer

@Mike Morawski

Yeah could you tell me how that would work with the seller helping out ?

Theresa Harris · Answer

When looking for a place, remember it isn't for you (well it is for a year or two), but a rental.  Don't buy to match your taste and your finishes.  Buy based on the numbers.

Aigo Pyles · Answer

@Todd Turberville

If you dont have the conventional requirement of 20 percent, if you are a first time buyer you can put at least 6% although there are loan schemes that allow you to only put 3% but you have to occupy the property. You can either go for single residential or multifamily up to 4 units. Beyond that, it would be a different story. Schemes require certain credit scores. So you have to meet the credit scores in order to be approved.

Nathan Gesner · Answer

You could purchase a property to live in and then convert it to a rental after the mandatory occupancy period. However, this requires you to move twice.

Another option is to purchase a property with 2-4 units. This will still qualify for FHA as long as you occupy one of the units. Rent out the other units for the mandatory occupancy period. Rinse and repeat. This is what Scott Trench did and I believe he had eight rentals within a few years. If you do it properly, you can have up to eight rentals that will pay for themselves and the cash flow will be enough to pay for a single-family home for you to live in. Or just keep buying up four-plexes until you hit your maximum. That would give you 40 rentals in less than 20 years with less than 5% down on each one.

If you want to learn more about this, read the House Hacking book by Craig Curelop.

Jody Sperling · Answer

If you live in it for a year while you fix it up, you can get a loan for as low as 3.5%. That's how we bought our recent home, though our bank required us to put 5% down. Most banks will probably offer similar terms, but we encourage others to bank locally, because local banks offer better investor options, in most cases, as you grow your portfolio.