First time buyer, 50k in hand...what to do?

Question

Hello! This is my first post. Impressive site and community. Hoping someone can help me, the newbie. I mean, really new lol

So i have been working on my credit score, now over 680. I actually have saved $65k total (vs 50k) and am facing a buying decision. I would love to get experienced feedback as to what I should do.

Firstly I value my time more than anything else, incuding money. I do want to be financially free, and using rental properties seems like a good plan. I also want to have low stress, with not a ton of debt (i come from the dave ramsey school, so my credit was nill just three years ago). I am self employed, have produced video freelance for over 15 yrs, and have been pre approved for a 150k loan...but my issue is this: i live in a nice SFH, been renting far too long, and my landlord is considering selling it to me for around $140k. 3705 Ives Way Norman, OK 73072 is the address. There is another property on the other side of town, a townhouse for $55k total - address is 219 Justin DR Norman OK 73071. So, the delimma is what is the wisest choice to make...buy this $140k house and make payments on a 15yr mortgage, or have the townhouse paid off within a couple years and start saving for a SFH to move into while either selling the townhouse or getting into being a LL and renting it out. the townhouse seems like the best decision, but it is small and cramped compared to my current place. I am a very good saver and dont consume much, so either way I can save money.

Feel free to ask me anymore questions about my unique situation and I will reply asap.

Kara C. · Answer

Hey Dallas, I don't know if you remember me, but we went to high school together.  I'm still here in Norman, supporting myself as a real estate investor with single family homes.

It looks to me like you're considering two ends of the personal housing spectrum here: a nice house at the top of your price range, and a cheaper, smaller property that would leave you more money to invest with.  There are pluses and minuses to both options and it really comes down to what you want/value.

I'd encourage you to remember that it's not really a choice between the specific house you're currently renting and the specific townhouse you're looking at for sale.  There are a ton of nice properties in Norman under 150k.  You could certainly find a place with the space you want at a price that would let you pay it off quickly and/or get into investment properties quickly.

I'd be happy to meet up in person if you want some more specific advice about your situation or the Norman housing/real estate investment market in general.  Hit me up via PM here at BP or at the email address in my profile if you want to get together or just want to ask any questions.  I have a lot of free time since I quit my day job.  :)

Dallas Lee · Answer

yes, i have read horror stories about HOA's too, they dont sound so great. I guess my problem is not understanding how to effectively use financing to build wealth. It seems counter intuative that debt would create wealth, but i understand the concept in theory for sure! I want to take advantage of it, but am very much in the dark having to experience or idea as to where I should start. My family is big on savings, but nobody invests, they all spend. Sad but true. I want to change that tide for good.

My father is the one pushing for a 15yr...he said he learned the hard way and doesnt want me spending so much in interest. He is scared of debt, so i think i am moving outside of his comfort zone where he cant really help me.

Dallas Lee · Answer

Thank you again, Linda! :) i need all the encouragement and advice I can get, being a newborn. There arent many duplexes available for sale in Norman, OK is the main issue but I will certainly keep my eyes open. I come from the school of "conventional wisdom" when it comes to RE, which doesnt seem wise at all lol like always put 20% down to avoid PMI, do a 15yr vs 30, and so on. The ideas in this forum fly in the face of that "wisdom" and I am intrigued.

And Andrew...yes, good question...because it was what i was told to do lol my family is totally ignorant when it comes to RE, and idk anyone locally (except Kara, now) to guide me. So...i am here! :)

Andrew Johnson · Answer

@Dallas Lee Maybe I'm missing something but why a 15 year mortgage?  Interest rates are extremely low so locking up a 30 year mortgage (especially on a place you could rent out in the future) would make more sense to me.  The same could be true for the townhouse, why pay it off in a few years?  If it doesn't cash-flow well until it's paid off, that's another story entirely.  I know condo fees can be very detrimental but I have to admit I know nothing about the Norman market.

Linda S. · Answer

@Dallas Lee,

Souds like Kara would be a great resource!   Another thought,  would you be okay house-hacking and getting a duplex?   If you did that, you could live in one side, and rent out the other one.    That'd be the smartest strategic move, however I'm all about enjoying life and enjoying your house, so I'd probably still pick a single family... After you buy your primary residence (3% down min), your next investment property will require 20-25% down payment.     The condo looked nice,  and if you want low stress, the HOA will take care of the basic maintenance.     I personally prefer investing in houses, because of no HOA fees, and no limitations if you want to expand or build on.    Based on your history, it sounds like you're set up pretty well financially and are at a great starting point!   Good luck!

Dallas Lee · Answer

wow! It sure is a small world when everyone is connected via the web. Super cool. Yes, I would love to meet up and pick your brain! You are right about what you said...i am virtually in the dark right now so advice is certainly needed. sending PM now.

Dallas Lee · Answer

Thank you, Linda! That is why I am asking, I really dont know all of my options. I agree about the debt thing, I am not afraid of it. Had I known where to invest my money, I would have been using credit sooner. Thank you for that.

So, this idea of yours is left field for me! I never considered that. How would the numbers work out on that, hypothetically? this is my first ever loan, btw...and I am starting out late at age 38

Linda S. · Answer

Why not both?   If you can get a mortgage for the current house at 140K,  and it sounds like i'd be for your first house, so you only have to put down 3-5%, and then get a second mortgage on the condo?     You could put 20-25% down, and likely be cash flow positive.

I sympathize and understand your anti-debt feeling, I was the same way, but you have to see real estate as an investment, and debt is a tool, not an enemy.

First time buyer, 50k in hand...what to do?

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