Glendale, CA · Member since 2021 · 34 posts · 10 votes
Hey guys, So I am a 18-year-old newbie who is thinking about buying my first house as one I can live in so I can put a smaller down payment, then renting it out after the right amount of time. (I recently heard about this.) Any advice on the best way to execute this and please explain it to me like you are talking to someone who knows very little about this lol. Thanks for your time!
Welcome to BP. My first question is, have you considered moving into a multi-family property instead of a single family home? You can still utilize many of the same low down payment options, but you will be able to have other units pay your mortgage for you instead of you being on the hook from day one. One thing to keep in mind is that there are many programs out there for first time homebuyers, so make sure you choose wisely in your first investment.
It sounds like you are new to this all. I would advise you to read "The House Hacking Strategy" by Craig Curelop. This will probably answer many of the questions you are seeking out.
Welcome to BP. My first question is, have you considered moving into a multi-family property instead of a single family home? You can still utilize many of the same low down payment options, but you will be able to have other units pay your mortgage for you instead of you being on the hook from day one. One thing to keep in mind is that there are many programs out there for first time homebuyers, so make sure you choose wisely in your first investment.
It sounds like you are new to this all. I would advise you to read "The House Hacking Strategy" by Craig Curelop. This will probably answer many of the questions you are seeking out.
First talk to a bank about how much you can borrow. Usually you will need 5% down payment.
When looking at places, run the numbers to see how much your mortgage payments will be along with property taxes and insurance. There are also other costs while you live there-utilities (electricity, gas, water, sewer, garbage).
Think about what type of tenant you want as the type of home you buy will attract a certain type of tenant. Cheap houses can be cheap for a reason: tougher neighbourhood, higher turnover, etc. On paper numbers may look good, but in reality the vacancy and repairs will kill the cash flow. Often a starter type home in a good area is better. Can you find a place with a legal suite.
Find a good realtor to work with and one that deals with rentals. When you put in an offer, include inspection and financing conditions.
its a solid plan to relieve some of the payments or put extra money towards smaller debts. I bought my first home lived in while renovating and now im getting a roommate. depending on where you live you can get travel nurses, military etc
Andrey, I did what you are referring to and it worked out really well.
I started doing this in 2009 and now have 6 properties.
Houses in Portland Oregon were selling for around $250K.
We'd just save up $50K and buy another house & move into it every 18-24 months.
This was relatively easy for us to do before we had kids.
The challenge will be you can do a low downpayment for the first house but each house after will be 20% down. You'll also need to line up your renter before you close on the next house, which is easy to do if you're living in the house.
You will get a better interest rate by moving into each house and living there for a year or two.
Stay away from condos and buy 3-4 bedroom properties so you can rent out bedrooms out to your friends.
Its a good strategy, just know it will only work for 4-5 properties (because of the banks rules).
I think your best bet is to first talk to a couple of folks. First would be a lender - a bank or a broker - to explain the situation and see what, if any, hurdles you might have: is your credit adequate (you may not have super deep credit and so would need to talk about this, for example), ask what you might qualify for. Ask people you know if they have recommendations.
There are lots of programs out there for first-time buyers (and some are state or county specific). There are also down payment assitance programs. One of the mainstream options out there for you might be FHA - FHA requires a minimum down payment of 3.5% but also, (one of your other replies mentioned buying a multi-family property), allows for 1-4 units (as do many loans) but you do need to live in the property. There are lots of options out there and a lender can help steer you in the right direction.
After getting some idea of financing options, I would speak to an agent in your area. You can talk to the agent first - he or she may have recommendations for good lenders - just be up front about where you stand in the process... that you're trying to learn how the process works and what possibilites are out there for you. They'll appreciate your being up-front with them - if not then they're not the agent you want to work with.
I would start there and then start worrying more about cash flows, etc. as one of the next steps in your journey. I don't know where you are, but location can have a definite impact on your plans.
(Also remember that there are two reasons to stay in the house - one is what is required by the bank, one is how it affects your taxes - those two time periods can differ so make sure you're covering all of your bases).