From MN: How should I decide where to look and how much to save?

Question

I live in South-Eastern MN (Rochester) and I'm a newbie who is listening to podcasts, reading and trying to learn the language of real estate. I think I'm probably a few years away from being able to invest (that is, if I need 20% down--I'm not even sure what is reasonable for a multi-family house--duplex to fourplex, better neighborhood, building that doesn't need too many repairs). I need to simply start to look at listings online to get a sense, because at this point I don't know whether or not I would need to set a goal of a $40-$80k or something different for a downpayment. It would certainly take me less time if it's $40k down vs. something like $80k.

Question: I want to understand how much would be a good place to start--is it better to get into the market quicker by buying something less expensive (single family or duplex) or waiting and saving for a bigger downpayment for a more expensive/larger/or better quality property? It might be the difference of 2 years or more.

Question: Where do I start to look in terms of geography? Should I just start looking at listings in my city (Rochester), look at cities within 1.5 hours away (when I mean looking at this point I mean going online to look--I'm still very much a newbie). If I want to look farther away from where I live, would I just pick a city and start looking at listings and start learning how to run the numbers or would I look at what's trending on the forums to see which markets people are looking to get into? Is it way too soon to contact a realtor and just look to get some knowledge of the market even if it's a few years away?

What is the best way to spend my time if I'm still in the knowledge acquisition phase and figuring out where to invest stage?

I would appreciate your input. I'm literally dipping my toes in the water by writing this post.

I'm looking for something to work on besides listening to podcasts, saving money for a downpayment and reading books. What's the next thing I need to start to learning while I continue to read/listen?

Thanks!

Sylvia

John Woodrich · Answer

Hi Sylvia,

You posed a lot of questions which require a long response and my guess is that is why you don't have a comment yet. I don't have time to answer all of the questions but the first thing I would do is figure out where you want to invest and learn the market. If you want to invest in Rochester then I would religiously follow the MLS so you get an understanding of pricing. You can't get a good deal unless you know how to spot a good deal.

As far as your down payment goes - this will depend on what you plan to purchase. Many people start off by using FHA to get into properties with a lower down payment. This could mean purchasing a new house for you to move to and renting yours or it could mean purchasing another house and living there for a year before renting. This also works for multi-family on 4 or less units. It is a lot easier to get in with a 3-5% down payment than a 20% down payment.

The worst thing to do is jump into a bad investment for the sake of getting in the game. I personally think prices are going to fall before they rise again due to my expectations on interest rates rising.

You say you want something other than podcasts and books but there are many of these that will answer your questions on how to get started. I would start there.

John

From MN: How should I decide where to look and how much to save?

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