Saved up $20k to house hack. Now coronavirus... what do I do?

Question

Hey everyone. I am 20 years old and currently live in the mid west. I live at home and don’t really have any bills and right now have saved up a little over $20,000. I wanted to get to $30,000 before starting my home search. I was planning on buying a 2-4 unit property with an FHA loan.

Now with the whole virus going around I’ve heard lots of different things from different people. Apparently FHA loans have been suspended. Is now still a good time to buy? What would you do if you were me? I was very eager to start and now this happens :/ Thank you!

Aaron K. · Answer

@Blake McFarlane pro tip; don't quit your job like that, ease into it, real estate investing takes capital and a job is the best way to get that when starting out.  If you want to be an RE agent, do it part time, because building a clientele is hard and I mean really hard and with it being a commission based job it can be feast or famine.  Anyone on a commission based job right now that doesn't have a good amount of savings is probably going to have a rough time.

Mark F. · Answer

I house hacked around your age with far less money down during the GFC. While I don't like to beat myself up, selling that house was something I wish I could take back so much, even with the profit I made on it. It would have been amazing to have 8 or so years later. Definitely try and buy after you hit your DP goal. I'm not saying rush and buy a bad deal but once you start building equity it makes things a lot easier. An hell yes to Aaron's advice, keep your job.

Tim G. · Answer

Wait, this isn't a good time to buy a house or find a person to rent a room with. Timing is everything, the odds are greater it'll be a better buying environment in the future than it is now.

Blake McFarlane · Answer

@Lumi Ispas Thank you Lumi! Appreciate the luck and I wish you success! :)

Crystal Smith · Answer

You're post ends with "What Do I Do" What you should do is research from credible sources. I can tell from your comment "Apparently FHA loans have been suspended" that you're not using credible sources. "I've heard lots of different things from different people" also tells me you're not using credible sources. Call your local bank/credit union or mortgage broker and ask them if they are still lending. Check the HUD website, who control FHA, and see if you see anything that suggests FHA loans have been suspended. (You won't find it)

Sorry if I sound harsh or critical but starting out you're career in anything including Real Estate means getting your information from credible sources. Here's what's going on

• For FHA-insured mortgage loans and loans backed by Fannie Mae and Freddie Mac (collectively referred to as the GSEs), a 60-day moratorium on foreclosures and evictions effective as of March 18, 2020, and (See  source in link below)
• For Fannie Mae and Freddie Mac borrowers facing a hardship related to COVID-19, the expansion of forbearance and loan modification eligibility requirements and suspension of adverse credit reporting.

FHA Mortgagee Letter

Michael Wegner · Answer

@Blake McFarlane

You’re in a great spot man. Like others have said - continue saving for another 6months/year or so and I think you’ll have your pick of places here shortly due to foreclosures, you should be able to swoop one up at a great price. Even with the virus craziness I really don’t see you getting a loan being that big of a challenge, assuming the other boxes are checked (reserves, income, credit, etc)

I just bought a 4plex house hack in The Gate area, it was a really really good deal before the crash and I’d say now it’s just a really good deal. PM if you wanna grab coffee sometime. I’m a noobie too but I definitely am open to helping you out / offering any advice that I can.

Rick P. · Answer

@Blake McFarlane

What’s the rush?  Stick to your original plan.  We are in the 1st inning of dealing with this virus.  We have no idea what tomorrow will bring.  Will this have the arc of The Spanish Flu and be with us for 18-36 months?  Will we slowly adopt an approach more akin to how Sweden is dealing with the virus?  Will we find a vaccine in 15-18 months?  Lots of uncertainty.

If this is in fact with us for a period of time, tomorrow’s deals will be better than today’s.  For reference, I have been able to sell two multi’s since March 1st.  Buyers didn’t back out and the perceived safety of Multi Family RE as an safe asset class is for the time being outweighing the uncertainty in every aspect of our economy.  I would expect that to slowly change over time.  Full disclosure, I live in Chicago & have investment properties in Northwest Indiana & Chicago.  Not exactly high flying markets to begin with.

-RP

Henry Lazerow · Answer

Use this as an opportunity to get a better deal then you can when everyone else is competing with you. I offered for a personal place last week and could care less what it does in next month I buy for the long term investment. Italy has now seen 3 days of decreases. It's likely this virus will be relatively short lived. China PMI came out today (not sure how accurate being china ha) but they are recovering rapidly.

Also not sure what everyone is talking about with mortgage. I use a good investment friendly lender and closed a deal last week and close another Friday. I am doing a cash out myself also and nothing with it has changed. There are differant ways to run loan freddie or fannie etc. to get around any issues.

Shawn Mcenteer · Answer

@Blake McFarlane if FHA is tough to obtain try low money down conventional mortgage.

Aaron K. · Answer

Stick to your plan if you need $30k for an adequate down payment and reserves then stick with that, there isn't a massive buying opportunity in RE yet like there was in the stock market.  If you rushed into buying something now you'd pay the same price you might have a slightly more difficult time in finding a tenant and you'd have less reserves so there isn't really an upside.

Saved up $20k to house hack. Now coronavirus... what do I do?

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