My First Deal, Buy or Keep Saving

2 Replies

Hello everyone,

I have been analyzing a 3-4 unit property that has been on and off the market for over a year. On paper, my numbers are looking like it will cash flow nicely. I guess with this being my first deal I just need some assurance and encouragement to jump in.

The property is listed at $125,000 with 3 units rented to long-standing tenants. There is a “storage” unit that could be fixed and rented out as a fourth unit as well. The current rents are $200 under the market average of $700, so there is room to increase. All units are metered separately and I could house-hack with $4,500 out of pocket. According to my lender, the monthly mortgage payment would be $1,000/month (taxes and insurance included).

My concern is not having a large safety fund if things were to go wrong soon after I purchase. Should I jump on this deal or keep saving to have a cushion later down the road?

@Dylan Thomas The numbers look good but I see one problem. You say you would house hack but you also say that the 3 livable units are rented to long term tenants. I know you say there is a space that could be converted but how much would that cost? How long would that take? If you think you could get in for only $4500 out of pocket I assume you would be using and FHA loan. If that is the case you would need to be living in the property and if all the livable units are rented I don't know how you would make that work. Sounds like a good deal overall but I don't know how you would make it work. If the $4500 is all the money you have in the world and you wouldn't be able to cover an unexpected expense of $2000 or so then you might want to wait till you are in a better position. Also you mention that the property has been on and off the market for over a year. That would give me pause. Usually that is a sign that there is something wrong with the property that would need to be fixed and that means extra $$$. Just some food for thought. This game is all about risk reward so at the end of the day what is your risk tolerance?

@Tyler Gibson Thanks for the feedback Tyler!

I was hoping to be able purchase the unit when one of the leases are up so I could get into a unit that way. Or better yet, live in the unit that needs work if it is not in too bad of shape that way I can work on it and still rent out the other 3 units. I would have roughly $3000 in reserves if there was an emergency.