How much should I have saved before investing?

Question

Aside from making sure I have a solid education with respect to investing, I definitely want to make sure I have a solid amount of savings before I get started.

I'm planning to invest in a duplex, triplex or quad as my first home and first real estate investment. How should I determine how much to have in the bank before I buy?

Joshua D. · Answer

@Valerie King

Nobody can answer this for you. Its kinda something that you have to run with your gut on a bit, especially on your first deal.  The more cash reserves you have the less risky the ordeal will be.

Once you buy the property you will need cash to make repairs and cover empty units.  How much will you need?  No one can answer that.  My encouragment is that when you are just starting out and have no assets to your name, than take on more risk. If you wanna buy a triplex and when its all done only have $1000 dollars in your account, then do it!  you can usually hustle your way outa tough situations by doing work yourself. and having a credit card handy. (be careful with this)

We bought our first duplex to live in and after the rehab was done we had about 4k left in the bank.  My wife was not happy that we dwindled our savings that low, but after a few months of seeing our payment covered by the tenant, and we were building that back up, she was happy.

Now days with many more units, we cannot have less than 20k in the savings or she will blow a head gasket.  Im glad to have a wife to keep me liquid or I will prolly go broke in the next downturn.  I'm an all in kinda guy.

Good luck!

Todd Magin · Answer

The perfect way to start!  Although I did not go this route, I wish I had.  I could have owned my own first house much sooner than I did. I did it the old fashioned slow way, saving up for a down payment on a SFH.

My advice would be to talk to lenders in your area and get a ballpark figure of what you will need to bring to the closing table in your hypothetical deal.  If your credit is good, you will be able to get very favorable financing if you intend to live in the property.

Another option is to partner with someone on your first deal or two.

I'll let other investors chime in who have actually done the above.

Good Luck!!