How much cash in hand should I have to start out!

Question

Hello all:I am starting out in this new journey, and I want to start out with a duplex. I live in Orlando, FL. I have a realtor working with me already. He is sending me listings, but after doing research and analyzing the properties, the ones that promise a good return, need a fix up. My question here is, how much money do I really need to have in hand for the closing costs approximately to start in this journey. Thank you all.Stephanie

Nathan A. · Answer

You need money for the down payment, closing costs and rehab (including a buffer as @Nathan Grabau said). All of that money is going to go out of your account when you close or pay for the rehab. But at the risk of stating the obvious, you need to make sure you aren't draining your bank account to nearly zero and living paycheck to paycheck after the purchase. You need money left over afterward for your reserves and personal emergency fund too.

Michael Haas · Answer

@Stephanie Espinal if you have a Realtor the answer is easy - ask your Realtor :). Every local market has different vacancy and labor/renovation costs, so a good local investor-realtor will be able to answer this best.If they don't give a good answer, or don't know, find another Realtor. They're your expert!

Matthew Kwan · Answer

You can put as low as 0% if you were a former/current veteran. I used FHA with min of 3.5% to start off which was $30k in the Seattle market. As for conventional it will require as low as 3-5% down for single family primary and 15-20% for multifamily. The tradeoff if using FHA is lower down payment even for multifamily but you cannot use fha for your 2nd loan unless you refi it out in order to reuse it, and the mortgage insurance premium (MIP) is higher than conventional (PMI) private mortgage insurance. It really depends what your current financial situation...would you rather have more liquid cash or put more down just to lower your mortgage payment. @Carlos Valencia @Albert Bui

John Morgan · Answer

I started with 30k in my pocket 8 years ago. I’ve got 17 properties now and glad I took that leap of faith when I jumped in not knowing a thing in 2015. So I’d say 25-40k will get you on your way. Just get creative with financing along the way.

Nathan Grabau · Answer

This depends on your renovation budget, condition of the property, and your personal financial situation. The reno budget is pretty self explanatory, I would just make sure you have a buffer. With regards to condition I would look at the age of major things like appliances, hvac, hot water heater, roof etc, so that if they are nearing an age where they begin to fail and need to be replaced, you are prepared to handle all those costs that could happen soon. If your personal financial situation is strong, such as you have a very high paying job, but have a high quality lifestyle that you could pull back $100 dinners for a few months if you needed to absorb a blow, you can have less cash and vis versa.

Shawn McCormick · Answer

@Stephanie Espinal I always advise my clients to budget for 3% in closing costs. This will depend on what type of loan you are getting (DSCR, investment or conventional) and if you are buying points to bring the rate down as well as how much the lender will require you to escrow for taxes and insurance. I would suggest you get with your lender and ask those questions so you know what to budget for. Taxes have gone up quite a bit around Orlando, so if the property hasn't been assessed in awhile, expect that to jump up from what is currently showing in property appraiser's site. Since you won't be able to take advantage of the Homestead exemption, that will always make taxes higher here too. You may not have as much luck with buying from investors on a competitive product (duplexes), but if its been sitting awhile or needs a lot of work, negotiate some or all of your closing costs into your offer. Or have the seller pay for points (not a rate buydown... 2/1 or 3/1) meaning have them pay for your points especially if you plan to hold the house for long term.Hope this helps.Best of luck

Raymond J. Rodrigues · Answer

Hi @Stephanie Espinal, if you're buying the property as a primary residence, your closing cost can range anywhere from 2-4%.

Taylor Dasch · Answer

Honestly I would just start and then adapt with how much you have, it is odd but if it turns out and you need more cash then you will typically find a way to get it - at least in my experience. Closing costs will typically be around 3-5% of the propertys sales price. It depends on the loan product as well. Also, if you are planning on house hacking and the property is livable, you can acquire the property and then fix it up over time.

Stephanie Espinal · Answer

@John Morgan Thank you! I am just looking for a number to start. You gave it to me. I am almost there. I am aware that this number will change according to the property I move forward with. But at least I know now I am on the right path.

Stephanie Espinal · Answer

@Shawn McCormick Great information! Thank you so much!