Please, help me with and advice on my first investment property!

[Ian Dikhtiar]

Hi, folks!

After tons of hours of reading, watching and listening to everything real estate investment related I decided to finally get my first investment property. However, I still cannot decide what should be my first one, maybe someone has an opinion on it!

Gonna try to put my financial situation as short as possible!

1. I'm 25 years of age, married and have 3 pets.
2. Currently renting a really nice single-family house in a very good Chicago suburbs area from my relatives for $675/month + all utilities (basically we don't pay any rent, just taxes, and insurance)
3. Have a good credit score of 750+, no debts and a good salary that allows me to save ~$2,000/month
4. Have $3,000 in savings
5. My mom has ~$45,000 in savings she's willing to put on a table and do a partnership with me

That's where I'm at financially. Now, the options I see so far is:

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Buy a rental single-family with a conventional loan and put 20% down, while I stay in the house I'm currently renting. My limits as of today are around $50,000 which means it's either $250,000 for a good-condition home or $150,000-$200,000 that need some work.

• Pros: A lot of houses on the market; only 1 tenant (or a family); some cash flow; We can stay in a best possible rent situation in a very good neighborhood;
• Cons: If vacant - all the mortgage and taxes on me; renting in A and B areas with high rent might bring much more demands for maintenance for every little thing

cash flow if occupied (with savings): $250 from rent - $675 from what I pay + $2000 I save every month = $1575

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Buy a 3.5% FHA-loaned multi-unit. Approximate price is $375,000

• Pros: a lot of equity gained; if cash flow is positive after I move in - I can live for free and will have even higher cash flow when I move out; if one apartment vacant - it's not that bad
• Cons: almost no houses on a market; from those that are active right now - either too expensive, in a bad neighborhood or in a very bad condition; almost no 3- or 4-plexes, but a lot of duplexes, but if another apartment is vacant - all payments are just on me; I don't care about myself, but I will need to move my wife from a nice place into a crappy apartment, pardon my French; most of them need work and probably won't pass FHA standards

cash flow if occupied (with savings): $150 from renting + $2000 I save every month = $2150

cash flow if vacant (with savings): -$2500 mortgage and taxes + $2000 I save every month = -$500

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 Buy a 20% down conventional loaned multi-unit. The maximum price is $250,000. Must require no work simply because I will have no money left.

• Pros: I don't need to move out; some equity might be gained;
• Cons: Almost impossible to find a cash-flowing duplex for this price. A lot of available are in neighborhoods with 35% vacancy rates, but in good areas - there are none.

cash flow if occupied (with savings): $500 from renting + $2000 I save every month = $2500

cash flow if vacant (with savings): -$1,600 mortgage and taxes + $2000 I save every month = $400

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I don't really want to deal with anything that needs work because I don't have a team yet and most likely it will be a mess if I jump straight into it

Aslo, I don't want to deal with condos or townhomes because of the HOA, association fees and all the rules that my tenant might be breaking and I will be responsible for it

Do you guys have any good suggestions? Will be happy to hear your thoughts on it!

Thank you!

[Ibn Abney]

@Ian Dikhtiar Hello!!

IMO i would focus on buying a personal residence first. this will get you a property and teach you the process from market/property selection to property management. With the numbers you mentioned I would focus on units $80K-$100K, with 5%-10% down. 

Also, condos/town-homes are fine. Don't corner yourself or looking for cheaper areas. Money is not free. You have to sacrifice somewhere for gains tomorrow, usually in the form of location or property type. 

Lastly, I would not recommend taking any money from your mother. All investments involve risk and you are risking 14X the amount of money you personal have in reserves. If you can save $2000/month then you should be able to take down a $100K property in 1-2months (with 3.5%-5% down). use that $45K for the 2nd or 3rd deal.