Newbie investor struggling to make first purchase
I am newbie investor trying to acquire my first property and I am leaning towards purchasing closer to the area I currently live which is in aurora. District 204 is a good school district and I am trying to buy a town home or condo to make the maintenance of the property easier. I have cash reserve to make 20% down payment but every property I anayalze seems like a negative cash flow property. Any guidance on how to look at property and make my first purchase. I would happy to connect with anyone if they can provide guidance.
You're going to have a hard time finding a condo or a town home that cash flows right now. Not only are interest rates very high compared to just a couple months ago, but you are going to pay HOA dues on a condo or town home and those dues will usually eat up all your cash flow.
A common strategy for new investors is to find a duplex, triplex, or fourplex. You can live in 1 unit and rent the other units out. And you can get conventional financing on the deal up to 4 units.
Quote from @Sandeep Rao:
I am newbie investor trying to acquire my first property and I am leaning towards purchasing closer to the area I currently live which is in aurora. District 204 is a good school district and I am trying to buy a town home or condo to make the maintenance of the property easier. I have cash reserve to make 20% down payment but every property I anayalze seems like a negative cash flow property. Any guidance on how to look at property and make my first purchase. I would happy to connect with anyone if they can provide guidance.
Properties don't aways cashflow. The sales prices are so high right now that they are hard to find. You need to look harder, find deals off market, or just wait until the market cools down.
@Sandeep Rao, It all depends on what you're trying to accomplish. We don't know what your goal is: are you trying to find something to house hack and rent out what you can and live in one of the units/bedrooms?
Are you trying to buy a non-owner occupied rental?
What about the maintenance that makes you want to delegate it to a third party (HOA?)?
Are you trying to cashflow while living in it or are you talking about how it won't cashflow after you move out?
Are we talking about renting to Long Term Tenants or Short Term Tenants?
We'd love to help out but we need specifics to find out what's going on. Here's a quick synopses of what I think just based off of what's provided:
#1) I think looking into local school districts is really important to consider, it will dictate the quality of tenants and provide a projection of how well that neighborhood will perform/stay safe in the future. You can diy a house but you cannot diy the neighborhood, so location is very important.
#2) I'm not sure what maintenance you are referring to, but if you're looking at a condo, typically HOA's will cover any maintenance outside of the studs. Siding, roofing, gutters, etc., is covered (with a monthly premium), but interior is to the owners. It's up to you if you don't want to have to deal with hit, but understand that to delegate that out costs a premium, like anything else. Sure, delegating a roofing job makes sense to you but you are paying a premium to have someone else do it. So it's up to you to determine if it makes more sense for you to save the money from cashflow to afford those capital expenditures, or pay a premium to not worry about it.
#3) 20% down is significantly if we are looking at owner-occupied. Sounds like you are looking for non-owner occupied, but if you've never bought a property before, I highly encourage you go the owner-occupied route. Less money out of pocket and you can reduce your cost of living expenses by house hacking it (then the money you would be spending if you weren't house hacking turns into cashflow or can be saved for the next down payment).
Just give us a few more details on this one and we can give you some better guidance! Hope this helps!
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
- Investor
- Austin, TX
Some markets are not built to cash flow, the purchase price and rent ratio has to be high. Secondary and tertiary markets with significantly cheaper housing is where you an find cash flow.
@Sandeep Rao buy a duplex and househack it. I get thinking a condo or a townhome may be easier but it also could not be. HOA's are notorious for not taking care of things and costing you tons of money. Buy a duplex, control 100% of it and start your investing career off right!
Waiting for the market to "cool down" is never a good strategy. You are in a very desirable market- prices are higher and it's growing so vacancies are lower and typically tenant quality is higher.
I'd look at it one of two ways; dig in and network to find properties that at least break even for the first year. They are out there- but you may need to make some friends in order to find them. In a market like yours, the cash flow will come with time and then it'll turn your sort of crappy deal in to a cash flow machine in a decade or so and it'll triple in value in the meantime, but that's how those markets work.
Secondly- if you are buying close to where you live, why not house hack? That's like taking the fast track to wealth and you could probably pull it off pretty easily.
Best of luck!
