Cleveland, OH · Member since 2016 · 2 posts · 0 votes
Hi everyone, relatively new to BP/real estate and looking for some advice. I am in the Cleveland, OH area and looking to get into real estate. Most of the houses in my neighborhood are out of my price range, but one just came available at the top of my price range (actually probably a hair above, but hey). My question is, is it best to begin by buying a nice property in a good area for a reasonable price or to buy something that is very cheap and try to start of in the lower end. FYI the property has a 2BD/1BA (with a spare room that could be an awkward 3rd bedroom) down and a 1BD/1BA up laundry in downstairs only, both kitchens are functional but could use a slight upgrade and carpet needs replaced/wood floors need touched up. Everything else should be ok. Property is around $200k and I have no mortgage history and would have difficulty putting $40k down before anything else. I believe I would like to have 7.5%-10% ROI per year and I think that is doable. I don't have much money to put in, maybe $30k-ish, but i am really trying to get started. What is the first step?!Thanks for any and all input.
Realtor · Keystone Heights, FL · Member since 2015 · 340 posts · 118 votes
10y
It's never a good idea to be house poor. Don't buy what you can't afford. Have you considered house hacking? Use your money as a down payment on a 2-4 unit property that you intend to live in. Get a FHA loan for 3.5% down. With $30,000 to work with, you could potentially buy something in the $750,000 range if need be. Live in one unit, rent out the other 3. The cash flow from the 3 units should cover all your mortgage expenses and put money in your pocket each month. Just food for thought.
Greencastle, IN · Member since 2016 · 3 posts · 1 vote
10y
Cory,
I am a newb as well but after having a few growing pains and after having blown my first mortgage I will give you this hard learned lesson of mine. Can you afford this house on a 15 or a 20 year mortgage? If not, do you plan on staying in this house long term (10+ years)?
We took out a 30 year FHA mortgage on a stable, upscale neighborhood and are regretting it now. We are planning on moving 5 years into our mortgage and are not going to see nearly the returns that we would have on a 20 year loan.
Realtor · Cleveland, OH · Member since 2015 · 2k+ posts · 857 votes
10y
Could you find something that meets all your criteria but in a cheaper neighborhood? Live in it for a little while and then move onto the next. There is not point stretching your budget where you will not be able to sleep at night.
if you need to talk to a lender I can pass you to a few lenders and they can explain your options
Realtor · Keystone Heights, FL · Member since 2015 · 340 posts · 118 votes
10y
It's never a good idea to be house poor. Don't buy what you can't afford. Have you considered house hacking? Use your money as a down payment on a 2-4 unit property that you intend to live in. Get a FHA loan for 3.5% down. With $30,000 to work with, you could potentially buy something in the $750,000 range if need be. Live in one unit, rent out the other 3. The cash flow from the 3 units should cover all your mortgage expenses and put money in your pocket each month. Just food for thought.
Realtor · Keystone Heights, FL · Member since 2015 · 340 posts · 118 votes
10y
For the record, FHA won't give you a mortgage for $750,000. I was simple using that as an example of what your $30,000 could potentially do for you. The 2016 FHA lending limit for Ohio varies by county and unit number but a 4-plex in Ohio is typically limited to $521,000. A 3-plex is in the $400K's, etc etc. You get the idea.
Lender · Denver, CO · Member since 2016 · 56 posts · 31 votes
10y
@Cory Parish I agree with @Walter Key I am saving up for my first home purchase and intend to use "house hacking" I have no where near $30k to put down but intend on purchasing a couple doors with an FHA loan and approx 3.5% down.
Cleveland, OH · Member since 2016 · 2 posts · 0 votes
10y
Thank you all for the input. I guess I got excited as it is a relatively affordable house in GREAT area and I'm sure it'll be a great rental opportunity. As far as FHA loans for less than 20%, what is the deal with those? How long do they take generally take to process? Does it have to be from a certain institution, or do most banks offer them? I appreciate the help everyone
Investor · Oklahoma City, OK · Member since 2016 · 98 posts · 51 votes
10y
Any real estate agent should be able to help you find a lender for an FHA mortgage, I think. You can usually close within 30-45 days if the property meets FHA guidelines. The guidelines are fairly reasonable, has to have heat, floor coverings, paint on walls, working plumbing and electrical, etc. Not sure of all of the exact requirements but If the house is suitable to live in, (and you plan to live in it yourself) it is reasonable to assume fha would be an option. I am not a lender but we bought our first home with an fha loan. It is a good program and definitely worth looking into! I agree with the above poster that said make sure you don't go over your budget as you may end up "house poor". Better to buy what you know you can afford and never have to struggle for payments. @Cory Parish