24 year old looking to buy first property with partner

[Pavan Patel]

Hey guys, I'm 24 years old living in NJ, looking to buy my first property because I want to get some sort of investment going. I have a stable government job where I make $70-80k depending on overtime. My best friend is also looking to invest and we thought we should buy a house and rent it out. We are not looking for passive income out of the rental. Just would like to own something that can help grow our net worth. I would like to use this to offset the rent I throw away every month. And I know you guys will say to move into the house but I'd rather not. The place I live has sentimental value for me and it's really cheap for the area and I don't want to let go of it. And then maybe another 5-7 years down the road, if things go well, we will buy another place. He also makes around the same amount of money. So total income is about $150k, pretax. Decent looking 2br houses that I have looked at in the area go for about $150-$175k. We have more than enough savings to cover the down payment and be able to pay the mortgage for a while in case we can't find a tenant right away. He lives at home with parents and I live in a cheap apartment with roommates so that would not be a problem. And also, before all the people start trashing the idea of working with a partner, that's not what I'm looking to discuss here. I don't have any hesitations there. I've known him since I was in diapers. We are family. Not worried about conflicts there. Just would like to know if it's a sound financial move here. Any pieces of advice in regards to type of mortgage, location, tenants, etc would be appreciated. Thanks in advance.

[Justin Fraser]

Hey @Pavan Patel I also am from central NJ and work with a partner, and we are not much older than you. We have a flip going in East Brunswick right now, and are closing on another rental next week. It sounds like you know what you want and are heading in the right direction.  The benefit to living in the house yourself is that you'd be able to put less of a down payment, but if that's not a problem for you, then great! What area specifically are you looking in? Are you looking for a property that you can fix up then rent out, or do you want something turn key? 

All your questions- Type of mortgage, location, tenants, etc. really depend on your specific situation, what you are comfortable with, how you are going to manage the property, how much time you have to spend on this effort, etc. I'd be happy to talk you through some of it, I'll send you a PM.