Too broke to start investing?

Question

I'm confused about the best way to get started in real estate, I'm currently living with my parents and my original plan was to buy a multi-family house and house hack it, I wanted to put in 20% down payment looking for a house that costs at most 250,000. The problem is that It seems like it will take a long time to get enough money to even put in a competitive offer currently have around 10k in emergency fund and about 20k just set aside.

Also, the criteria for the type of house will make it challenging as well with the price and looking for specifically multifamily. The money that I set aside was ment to pay my student loans off that have been deferred should I just be patient and try to save up more or just use a different strategy.

Nathan Gesner · Answer

It's reality. All the "experts" say you don't need any money, but that's just not true. Stop listening to the young people that started investing three years ago and instead look for the grey-haired investors with 30+ years under their belt. They'll tell you to increase earnings, reduce expenses, save up, sacrifice, take it slow.

Carlos Valencia · Answer

Hi Ronnie,

It sounds like you might want to maybe start with something a little bit more your budget or save more money. You can also get a co-borrower to help you qualify for more and bring in some money for the down payment. If thats not an option then consider maybe starting with a single family home and house hack it. This way if you manage to rent out the rooms in the single family home where you pay very little to nothing at all you can continue saving and still have an investment property. Once you reached your goal you can simply lease out the whole single family home and buy another investment property. Hope this helps.

@Albert Bui @Matthew Kwan

Ran Iarovich · Answer

Being in a rush always puts you in a tough spot. I would say to give yourself a little bit of time and relax to be able to save up more. You are young and you need to realize that real estate is a long-term strategy. If you put yourself in a crunch and start the game off at a bad start you will be at a far worse position than if you saved for 1 - 3 years and invested then. Understand the dynamics of real estate and the expenses, get your dream team around you of trustful lenders, agents, and mentors, and work for a little bit more to be able to get in when you are more comfortable investing your cash.

Anthony D. · Answer

I am very new to the real estate world and am intimidated by the competitive market as well. However, I know that location is always a major factor. Therefore, I have changed my mindset. If you can't swim with the big fish in one pond, find another pond where you can become the big fish and learn to grow there.

Joe Norman · Answer

You are spot on with this. 2-4 unit buildings in Baltimore tend to be homes that were converted into cheap rental properties as opposed to purpose built, singly deeded multi-unit properties. Because of this they tend to be in areas with lower property values (and, therefore, neighborhoods with the challenges that contribute to lower property values). Are you looking only in Baltimore City or also in the surrounding counties?

Feel free to shoot me a PM if you want to discuss your goals in detail!

Tim Bee · Answer

Eliminate bills you don't need. ie netflix, Prime etc.  Cut down on bills you have to pay like lowering your phone plan to no more than $40/mo.  Raise your credit card limits as high as you can incase you have to tap them for a no interest hard money loan.  Delete all but two major credit cards.  Work overtime as much as you can.  Find out if any friends and family will give or loan you money.  Look at homes for sale and rents in the area every day so you know what an average deal looks like.   Find a realtor who already does what you want to do and have them shoot you deals.   Once you've done all that then, and ONLY then are you ready to buy.  When you do buy don't settle for anything less than the 1% rule.  Your first deal could bankrupt you if you don't follow that rule.  Your first deal could also make you independently wealthy if you can swing it.  You really have to want it.  But trust me I have 16 single family houses now, all paid off and the money is sweet.

Ronnie Wainaina · Answer

Hey Alex,It's more challenging to find a small multifamily that is that price in a decent neighborhood in baltimore, it's below the average price. That's also another reason I'm rethinking the duplex idea, single family are easier at that price but still challenging because It's below the average price. It's still my preference to house hack a duplex but I'm open to house hacking a single family house.Ronnie

Alexander Murillo · Answer

@Ronnie Wainaina what city do you plan on living in? Is $250k a realistic price for either a small multifamily or a single family home with 3+ bedrooms (the more the better)? An FHA loan with 3.5% down would be less than $9k down. There are also conventional loans for first time buyers at 3% down. Get seller to pay for closing costs. Saving 20% down will take forever, and is unnecessary. You already have some decent savings in case of emergency.

I'm not saying to rush or feel pressured. Learn to make an educated, numbers based analysis and decision. But depending on your home market, investing can be very realistic for you. In 5+ years you'll only have wished you started sooner.

Blake Novotney · Answer

Why not use FHA or similar with 3.5-5% down to purchase a house hack? That would allow you to get started much sooner.

Too broke to start investing?

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