200k pre approval, 200k cash. 1st property. What’s your strategy?

Question

Hi everyone! I’m searching for my first property. I have been traveling for a few years and name now looking for a home, so ideally this is a house hacking scenario where I can add some forced appreciation (preferably in the PNW, FL, or other places close to nature).

I have been approved for a 200k FHA loan, and I also am blessed to have access to around 200k in a family trust that I can withdraw for a home purchase. I'm hoping some more experienced RE investors can chime in with some guidance... I have around 30k available for a down payment. When would it be smarter to withdraw from the trust (stocks) and when would be a better scenario to leverage the low down of an FHA loan?

My goal is to own a cash flowing real estate property in a vacation rental market where I can also live in / attached while the house is being rented as a STR, while adding some forced appreciation over the first year or two and then upgrade / acquire a new property(s). I do not have major roots anywhere so I'm open to living in many different markets.

Are there agents that deal specifically with vacation rentals like this? I’m ready to play ball!

Thank you so much for your time.

Will Fraser · Answer

Hi @Austin Shrigley,

As to your question about FHA vs Cash . . . IF you can use the FHA loan then great! You are going to find that metrics like Cash-on-Cash return are MUCH higher when you are using leverage. IF you were able to purchase this one using an FHA loan and still have money left to purchase another, or several others, you're talking about a win X 10!

HOWEVER, right now we are fairly solidly in a seller's market coast-to-coast and FHA loans have fallen on some disfavor, ESPECIALLY when compared to cash. So, if your local market is cooler than the average right now and properties are sitting on the market for a while then perhaps an FHA loan purchase would be fine and dandy with the seller. If not, though, then the question really becomes "How do I get the deal" instead of "which is better."

Let the numbers tell the story, and work with savvy pros in the real estate space and you should be in a safe and enjoyable place :)

Austin Shrigley · Answer

Thanks so much for the info @Will Fraser! That's very helpful. I was thinking that would be my best strategy, to use the FHA first and then have the cash available once I get more experience and learn. It's nice to know that the offer structure is so important to the seller and I will adjust my strategy accordingly!

Now it’s time to find the right deal.

200k pre approval, 200k cash. 1st property. What’s your strategy?

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