How Would You Allocate $20,000 for a House Hack?
I'm planning to purchase my first investment property by the end of this year or early next year. My current plan is to use an FHA loan to house hack a 2–4 unit property by living in one unit and renting out the others.
By then, I'm expecting to have around $20,000 available to put toward my first investment for things like my down payment, closing costs, and reserves.
For those of you who have been through this process, would you consider that a reasonable starting point, or would you continue saving before buying?
If you were in my position, how would you allocate that $20,000 between the down payment, closing costs, and emergency reserves? Is there anything you wish you had budgeted for before closing on your first deal?
For context, I've been educating myself by listening to the BiggerPockets Podcast, practicing underwriting deals, and working with an investor-friendly real estate agent and lender. My goal is to be as prepared as possible before making my first purchase.
I'd really appreciate any advice or lessons you've learned along the way!
Most Popular Reply
@Austin Kolb - hard to know whether it's enough without knowing details of your target property (price point, age, condition, etc...). Good rules of thumb are to set aside 5% of annual estimated rent for vacancy & capex each (so 10% total). Perhaps you have that covered in "reserves" already, but assume you have to eat those up front, especially vacancy. If it's not a turn-key property, budget out some funds for repairs.
When I got started, my business partner and I liked to say "we have 1 bullet". So we had to be certain the deal we pulled the trigger on would work. After 6 months of research, studying, and iteratively go through hundreds of zillow listings, we finally found one we had enough confidence in. It's ok to take that time, but you can speed up the process these days with more efficient analysis engines (checkout Property Alpha) and more widely available educational investor content. Hope you land that perfect deal like we did all those years ago!