What’s a good amount to have saved up for first rental property?

[Joseph Sapyta]

I’m trying to lay out my plan for my first property. Trying to find a duplex for around 150k more or less. For example if I do a fha loan and my down payment is around 5k, how much extra should I have saved for this ? And what would it be for?

[Guy Yoes]

@Joseph Sapyta

Yes to keeping reserves. I bought 4 duplexes within the last year. I was not house hacking but the costs are still the same. I did a 1031 on two of them and financed the other two. I did the 1031 through  @DaveFoster on BP. He is the best.

I paid an average of 105K for them. I put 30 % down and had to pay about 3000 at closing. Then I had to put a roof on one of them for about 4500k.  Within a year I had to put in a new AC unit for 4000 on the same property. So for the first year I paid around out about 45K for that property. 

As the owner and property manager, I meet the qualifications for a RE professional. Needless to say with the repairs and other costs I took a loss on the property. Which is a good deal tax wise but doesn't help with cash flow. 

House hacking you can do the improvements and write all expenses off. You will basically live rent free and use your income to upgrade the property and get more equity built up quickly. You should live there for atleast 2 years, then rent both sides and buy a SFH and live there 2 years also. Now you have a duplex and a SFH rental property. This is where real cash flow starts. You make good money and your renters pay your loan off for you.

Hope this helps.

Guy Yoes