Can someone verify my research and numbers for a downpayment?

Question

Hi, I'm looking for some confidence here with my numbers and would truly appreciate if someone could verify that my numbers and research make sense. I'm wanting to buy a duplex and I'm considering how much money I should be saving to put down.

Say the property I want to purchase is $250,000I want to make a downpayment of 3.5%Upfront PMI fee is 2.25% of property priceIgnoring PMI monthly premium of 0.55% for now

So written out it'd look like this:Total I need to save = ( (250,000 * 0.035) + (250,000 * 0.0225) )

Total = $14,375I figure an additional $5,000 for closing costs and initial inspections for a grand total of upfront money need to be $19,375. Any input very much appreciated, thanks!

Danny

Joseph Gozlan · Answer

@Danny Maller I'm assuming you're moving into one of the units and renting the other one.

I'd also try to save up a little more for reserves because surprised do happen and when you have a tenant and the fridge went out or the hearing/cooling you can't tell them to wait. You need to be able to resolved these "surprises".

Also, you'd need to pay home owners insurance and possibly the prorated taxes balance depending on when you buy.

So I'd add a $2000-$4000 to that.

Jeff Kehl · Answer

@Danny Maller the advice above is excellent, you need to make sure to have those reserves at closing because things will come up and I'm sure that sours/puts out of business many newer investors when they go into their very first property very thin on cash and the month after they close the furnace goes out and the tenant moves out. Prepare yourself for that to happen.

I have bought a lot of small multi's and I can tell you that is more the rule than the exception. You should do everything in your power during due diligence to prevent surprises but be prepared for it when it occurs.

Landlords that are selling are looking to get away from problems and if you don't uncover them, they are now your problems that you will have to deal with. If you find them ahead of closing you can get them rolled into the deal. If you find them after they will have to come out of your pocket.

So in addition to having those reserves do as much due diligence as possible. Don't expect your inspector to catch everything. You should try to learn everything you can about the property.

You can search on here and find great due diligence checklists but the most important in my opinion to understand are A) the majors systems/capex items, roof, hvac, plumbing, electrical, foundation B) The current tenants and what their plans are C) the operating expenses at the property particularly utilities but also miscellaneous stuff like trash and landscaping. D) Zoning and other governmental regulations.

Joseph Gozlan · Answer

Good luck @Danny Maller!

Danny Maller · Answer

@Joseph Gozlan Thank you for the reply, and yes I do plan on living in one of the units. I'll add $4,000 to my total. Thanks for your the insight.

Can someone verify my research and numbers for a downpayment?

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