anywhere, MA · Member since 2015 · 116 posts · 61 votes
I've never done this before. I live in Massachusetts and am 26. I have been out of college for a year and have been working full-time for 4 months. I have been saving money. What is the least amount that I can save on a down payment on a 3-4 unit home? I plan to live in the house and then move out later down the road. And I plan to buy a second house, then a third house and so on.
Saving $20K would take too long though. I can save between $5K - $10K. What kind of mortgages can I apply to with this much money as a down payment? I'm also scared if I save 20K and then use it all on a house and the investment doesn't work out, I'd be out of 20K. I do not have any military experience or anyone in my family who's been in the military. My plan is to eventually be financially free.
Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes
10y
Here is what you have to weigh out. For $20k max down, you have bought yourself a primary residence with additional income. If the numbers work and you can pay all of your bills living there without a tenant, then overall id say your safe. If you can't float the nut on your own, maybe it is worth reconsidering being your first investment.
If you are a first time home buyer, there a number of programs including down payment assistance etc.
There is a fine line between waiting too long to get into real estate and getting in too early.
If you gain the right knowledge on the particular niche you are considering you wont have to worry one bit because you will make your money going into the deal. If the numbers do not make since then move on to the next.
I have still yet to invest but what I am doing now is constantly learning and educating myself while at the same time saving so when that deal does come not only will I be ready, but I will also be able to take action financially. And who knows, with such a good deal there are many other ways that to find capital.
If you are looking into purchasing a property and living in one a popular loan will be an FHA loan where you can put down only 3.5%. Capital is key because you want to make sure you have more then just a DP. There will be closing cost and you will also want reserves for any cap exp. FHA must be under your name and it must be owner occupied.
Rental Property Investor · Providence, RI · Member since 2015 · 1k+ posts · 594 votes
10y
Here is what you have to weigh out. For $20k max down, you have bought yourself a primary residence with additional income. If the numbers work and you can pay all of your bills living there without a tenant, then overall id say your safe. If you can't float the nut on your own, maybe it is worth reconsidering being your first investment.
If you are a first time home buyer, there a number of programs including down payment assistance etc.
Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes
10y
I very much agree with @Rico S. . I am actually selling my single family home now in order to take advantage of an owner occupied 3.5% down FHA loan. No better way to start out in my opinion. If you buy a single now, then your second, third, and fourth units (depending on how you go about it) will probably require more like 20% down plus a bunch of other things like reserves, history, etc. If you go for a 3 or 4 unit now, you can do so with 3.5% down on all. Leverage is what makes RE such a great wealth building tool, and you can get maximum leverage with this route. Of course you don't want to over leverage yourself, but if the numbers make sense then it is a good way to go.
Entrepreneur · Providence, RI · Member since 2015 · 24 posts · 9 votes
10y
Hi, i think your best bet is go with a FHA loan. They have down payment as low as 3%. The down payment depends on the total price of the house. FHA requires you to live in the house and you can live in one unit.
I have not done it but plan on doing it and have read a bit about it. I don't know in mass but here in providence they also offer 100% financing which means no down payment at all. So check with your local housing authority I'm sire they offer some incentive to first time homeowners. Just my two cents :)
anywhere, MA · Member since 2015 · 116 posts · 61 votes
10y
Hi guys, thanks for taking the time to answer. Once I save enough money I will apply for the FHA loan. It sounds like a great opportunity. I have another question if someone can help me understand. How much were your closing costs usually after putting down 3.5%?
And how much per month do you usually save for the management company, repairs and possible vacancy and other expenses?
Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes
10y
Usually closing costs range around 3%, but that is possibly something you could negotiate into the offer to have the seller pay them for you. There is a wide range of answers that you will get on the % for mgmt, repairs, vacancy, etc. If you search the forums you will get a load of results. Management and vacancy are normally around 10% for each.
Real Estate Agent · Boston, MA · Member since 2016 · 106 posts · 69 votes
10y
I would also voice the FHA option, thats the one im pursuing right now. In terms of budgeting for management, typically what I've seen on here is 8-10% of monthly rent. For vacancy, that very strictly depends on where you want to buy; different markets have different rates, although I guess 5-7% is a "typical" vacancy rate I've seen on many deal analyses on BP. And repairs is another controversial one; while it is definitely a function of the condition of your property, what I've learned is that at least in your initial deal analyses, you can budget anywhere from 6-10% (12-15% total for repairs and cap ex). Again, though, this is only a very rough analysis.
Investor · Jamaica Plain, MA · Member since 2013 · 31 posts · 4 votes
10y
@Raeshelle C. look for city programs that help first time home buyers (Simple, you take a couple of classes in the weekend, and they help you with the entire process). You would have to be income qualified and have an above 675 credit score (i believe). These are great because in some instances they can even help you with your 3% down payment. Here are some links ;
Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having over 100 past ones to catch up on.
Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info. Here you will meet wholesalers who provide deals and rehabbers (cash buyers). Find them through Google and meetup.com