First Future Rental Property Purchase Advice!

[Nicholas S Sally]

Hey Everyone! 

I am currently in the market to purchase my first property. I have been saving up for a 5% down payment with my price range being in the low $200,000s. I have been building some reserves as well and I am finally ready. The goals for my first-ever property are to do some minor-mid renovations and ultimately rent it out for years to come. 

However, my family did offer one of their rental properties to me through seller financing. The 2 bed/1 bath single family property has been rented out for the past 7 years with the rent being $900. The property is due for some renovations. I know my family will not charge me anything crazy to own the home, nothing compared to a mortgage payment for a property purchase in the low $200,000s. They will most likely let me take over without a 5% or even 3% down payment. 

I guess I could use some advice. I want to start building equity in an asset and also start building my rental portfolio (I am 25). I want to make sure I start this process on the right foot and have a strong foundation to build on. 

Do I take over my family's rental property through seller financing with the goals of renovating the property and then keeping it as a rental in my portfolio? Or do I go into the market and purchase an updated single-family home or even a Duplex all priced around the low $200,000s?

[Dalton Summers]

If you're renting, I'd suggest moving into the rental property or buying your first home. Any time you spend renting is mostly a waste. Ultimately, I don't see why you don't buy both your own first home and the family rental within the year. Could potentially assume the loan (if there is one) on the family rental property. They could do a gift of equity for your down payment. Seller financing is great too which is why it might make more sense to purchase it second. You'll lose the first-time homebuyer perks once you take title to the property, but that's not too big of a fuss. That, and it won't be an arms length transaction anyway so that will probably exclude you from being eligible from some of the down payment assistance (DPA) programs or mortgage credit certificate (MCC). If you're going to buy a different property, I'd suggest looking into DPA programs to start. Take advantage of them if you qualify. I've got a DPA loan that is an immediately forgivable grant for the entire 3.5% down payment on an FHA loan. I think it's incredible. You're just going to turn around and refinance it in a year or two anyway when rates come down. It doesn't have a first-time homebuyer requirement and it's eligible for duplexes. I hope some of that makes sense. Just give me a shout with any questions.