Should I try to buy with a loan or Wait?

Question

Hello!

I’m in my 40s and
live in South Florida with my father and his wife. I own no
properties. My expenses are very low. Currently, I work a part-time
W-2 job that pays me about 17K/year. This is supposed to increase
significantly later this year as I transition to full-time in the
same position, but my employer won’t give me a date for this yet.
My credit score is over 650 and I have about $200K in savings. I also
have about 12K in debt on a 0% credit card offer that won’t expire
until next year (part of this is an unrelated business debt that I
think is a write-off).

I would like to move
out and live on my own again. And so I have been hunting for a
property within my budget, close to 1000 square feet, with a low (or
no) HOA, in my area for years to no avail. Recently, I found a
listing for a 920 square feet townhouse built in 2006 with 2 Bed/2
Full Bath and an HOA of about $230/month. Properties like these are
rare, in my experience searching.

The sellers are
investors and are asking for $240K and claim they won’t budge. I
saw the property and it looks good to me. It is also near to where my
dad lives, which is important to me. They claim it is being rented
for $1900/month.

Now, I have thought
about offering $200K, which would leave me with no money (I am
factoring in closing costs), but then renting it out for a year or so
to make up for this. The income from my W-2 job should cover my
minimal personal monthly expenses. After this, I would move in and
then, with a fully paid property use any extra cash savings over time
to purchase an investment property (or I could use a HELOC, but I
prefer to keep my home paid off) with a mortgage.

Since they claim
they won’t budge on the price, I am considering getting an
investment or personal loan for say $40-$60K instead, maybe for a
5-10 year term. To add another obstacle, the sellers say that the
previous potential buyer’s financing fell through and that they
want all cash. But I’m thinking they’d consider a mostly-cash
offer like mine and that this would make it less likely for the
financing to fall through. I’ve asked my real estate agent to check
up on the HOA for me, but she is still waiting on the seller for some
details. She did tell me it has no real reserves.

Does any of this
make sense, or am I allowing my desire to move on with my life color
my judgment and potentially get me into a bad deal? Should I try to
execute or should I sit this one out, keep increasing my income and
savings and try again in, say, six months, hoping another
lower-priced property will pop up?

Thank you for
reading!

Jaren Woeppel · Answer

Hey, @Mat Garcia

A lot of great questions in there. Couple of quick thoughts that may help. -Getting into a situation where you’re borrowing additional funds to close, which if it is an unsecured personal loan, will have an astronomical interest rate compared to borrowing a secured debt like a mortgage. So I would try to avoid that kind of debt, and try to only get low interest debt if you are needing to borrow. -Have you thought about potentially buying a house-hack property? Buying a house for you to live in, that also generates income. For example, buying a duplex and living in one side and renting out the other. There are may other ways to do it but the point being, you are not only buying a primary residence for you to live, but it also is an investment because it is bringing in money for you every month.

Mike Fingleton · Answer

Hey Mat,

I completely understand where you’re coming from, and I think you're asking the right questions here. First off, kudos for the careful thought you're putting into this decision! The last thing anyone wants is to jump into something that could put them in a tough spot, and you're showing a lot of restraint, which is a big plus.

Let me tell you a little story from my early years in real estate, which might give you a clearer picture. I was once in a similar situation low cash flow, lots of desire to get out of my parent's place, and the temptation to jump on a deal that seemed too good to pass up. I ended up stretching myself thinner than I should’ve, not accounting for some unexpected repairs and the challenges of managing a rental property with little experience. It wasn’t the worst outcome, but it definitely taught me to be cautious and to make sure I wasn't taking on more risk than I could comfortably handle.

In your case, you’ve got some solid pros here, especially with your savings cushion. But, I’d caution against overextending yourself, especially with the debt you’ve mentioned. While it's true that you're not paying any interest on that credit card debt at the moment, it’s still something to factor into your overall financial health. On top of that, if the HOA has no reserves, you might be looking at some unexpected fees down the road, and the previous buyer’s financing falling through might hint at deeper issues with the property.

The idea of buying the place, renting it out, and then moving in later could work, but you should ask yourself: do you feel confident managing a rental property from a distance, especially with your current income situation? As for taking out an additional loan on top of the purchase price, that’s another layer of risk that could come back to bite you down the line. Real estate can be a fantastic wealth-building tool, but the first property should be more about stability and long-term gains rather than short-term sacrifices.

Here’s what I would suggest: If you're really set on making a move now, maybe find a way to negotiate that price down..maybe a little under $230K, even if they won’t budge much. Otherwise, I’d consider sitting tight and building up even more reserves before diving into such a big commitment. I know the market’s moving, but patience is a virtue in real estate. With your current situation, I'd err on the side of caution, and I think you’ll be in a much stronger position in six months or a year.

But here's a question for you: Have you considered other areas of South Florida where you might find a better deal, or perhaps even something that's a little less on your plate in terms of potential headaches?

Let’s keep the conversation going, there are a lot of ways to approach this.