First-time homebuyer looking to purchase and house hack a quad-plex

[Joseph Shilen]

Hello everyone. Been a casual browser as I’ve been saving up for a down payment the last few years and feel I’m getting pretty close to my goal of purchasing a quad and house hacking as a first-time homebuyer, so would like to start getting some answers to some questions I have. I’d like to actively start looking in a year.

My target area is downtown Buffalo in the Elmwood Village neighborhood. Very desirable area close to numerous restaurants, shops and other businesses. Many nearby multi-unit homes are 100+ years old but seems the going rate is between $500-700k for quads that have been kept up well and updated. I’m putting my budget at around $600k. From scoping out the area and knowing several residents living in these types of properties, average rent for a two-bedroom seems to be around $2,000.00/month.

I have some questions, as I have no experience with the application process or landlording and would like to know whether my goal seems feasible for someone buying for the first time.

1. I’ve tinkered around with mortgage calculators and have floated around putting down 10% as the sweet spot for me if a home of this price is what I go with. How difficult would it be to get approved at 10 down for a property of this price with the plan of living in it as a first-time buyer? Putting down any more would be difficult, so I’d probably look for something cheaper if 10 isn’t enough. Is there any scenario that I could get approved putting down even less than 10 with a property of this value if it made sense to do so?

2. I’ve read around about closing costs - should I prepare for minimum 2-5% of the purchase price to close? Is anyone familiar with closing cost assistance in New York State and the requirements to qualify? I might make too much but wanted to inquire just in case.

3. During the approval process, do I have to prove to the lender that I’m capable of paying the full mortgage if the other three units are completely vacant based exclusively on income? Or does a lender consider reserves and what the amount the units can rent for into that equation as well? I’m guessing they look at all factors but say my hypothetical mortgage is $4,500.00 - would I need to prove I can pay that solely based on my income in order to get approved? I think the most ideal scenario would be to purchase a property that already has tenants in at least one of the units upon moving in.

4. Since this is a rental property, would my rate be higher, even if I’m living in one of the units and buying for the first time?

From the numbers I’m going by, if I were to go forward with this, I’m planning on having at least 10% of the property value (around $60k) in reserve upon applying for a mortgage and moving in.

Just trying to make a plan and understand whether I’m biting off more than I can chew here. I see this as an opportunity to live for close to free and possibly even cash flow if the above numbers stack up as I’m anticipating, and I have ample income from my full-time job, so don’t foresee being able to continue to put money in a reserve account for repairs and upgrades once I’m moved in being an issue.

Any thoughts or advice is appreciated. Thank you!