Buying with everything you have a good idea?`

[Natalie Davidson]

I am planning to buy a house with just about every dime I have saved. I may rely on the 5k in credit cards I have as a safety net. I know it seems risky but the homes at my maximum budget will likely produce the highest yield. 

So I wanted to ask the bigger pockets community, as a first time homebuyer is it safe to throw all your eggs in a new home basket? Keeping in mind, once I own it my expenditures will be under 1k so I will be able to save about 1,000 a month after purchase to put toward repairs.

Natalie

[Tiffany Plovie]

@Natalie Davidson 

   I advise my clients to never put all of their eggs in one basket.

    I understand the temptation to be debt-free. I have always hated the idea of owing anyone anything.

  While having full homeownership is every property investor's dream, it first begins with wise planning, for real estate and life in general.

  As someone who has been exactly where you are... And followed through with the purchase... I have learned through experience that it is better to keep your costs low, build up a significant cash reserve, and then begin paying off the loans.

   Remember, that after achieving your cash reserve requirements, the rate at which you pay off your loans is up to you. Please keep in mind that you can always pay your mortgage off with one lump-sum payment (just make sure that the loan carries no pre-payment riders or penalties).

   Seriously consider taking a 10, 15 or even 30-year note with 20% down. You will still have the ability to pay-off the loan, should you decide you feel uncomfortable carrying this much debt. Additionally, I would rent out the other room for additional income and set it aside for repairs and property maintenance.

  Also, having cash in the bank will give you peace of mine. The biggest emergencies in life (ie, the death of a loved one, caring for a family member and the unexpected loss of a job), all require that you have enough cash reserves to pay for expenses incurred outside of your main residence.

  If you plan on purchasing more houses in the future, strategically set aside seed money for your next purchase, build your cash reserves, pay-off (or down) this house so that it cash-flows and leverage that money (after saving 50% in a contingency fund for vacancies, ect.) into buying another house.

An alternate path to consider:

http://www.biggerpockets.com/renewsblog/2012/12/12/make-a-million-dollars/

Let us know what you decide, and keep us posted!