I want to buy my first rental this year and I want to start ASAP. The thing is that I don't know how much money I will need, beside of the obvious costs of the rental itself.
Is there money I should have besides the money down loan amount, or not? Also with the BRRRR strategy, how much money would I probably require for say a 150k SFH?
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
3y
@Simon Huber so I measured getting started with how much money I had at the time. I did not wait, I just went for it. Which is why I started with $30,000 properties. If you do want to start at this price point I would suggest targeting $15,000 and then make your offers so that you only come out of pocket lower than that amount. Ensure you have lenders that can help with the BUY and REFINANCE step and as mentioned above, know your holding costs. Hope all of that makes sense.
New to Real Estate · Sunnyvale CA and Maplewood, NJ · Member since 2022 · 257 posts · 161 votes
3y
In addition to a down payment, you'd need money for closing costs, holding costs, rehab and reserves (for vacancy, repairs and capital expenditures).
How much money you'd require for rehab for a BRRRR is really dependent on how much rehab the property needs, and could probably vary from $10K to $100K or more depending on the condition of the property.
Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes
3y
@Simon Huber so I measured getting started with how much money I had at the time. I did not wait, I just went for it. Which is why I started with $30,000 properties. If you do want to start at this price point I would suggest targeting $15,000 and then make your offers so that you only come out of pocket lower than that amount. Ensure you have lenders that can help with the BUY and REFINANCE step and as mentioned above, know your holding costs. Hope all of that makes sense.
Real Estate Agent · Member since 2018 · 459 posts · 414 votes
3y
A bit of a loaded question…so it depends on how you're going to own it. Owner occupied you'll need less (smaller down payment) but you'll have closing costs (could be around 3% or more of the sale price), should have reserves for an emergency (if you get let go from your job, tree falls on the house, etc.), repairs that may need to be done before renting out, having reserves for maintenance (landscaping, leaking faucets, etc.), and then showing reserves to a bank/CU/lender when you go to refinance and buy your next BRRRR. Obviously having more is better, but it really depends on the condition of the house.
If you had 6 months of reserves of rental income, that would be very safe. Some people leverage lines of credits on their homes for emergencies but it also depends on your level of risk. Could you give us an example of what you’re looking at and how much you have to spend outside of the “usual rental costs” and we can help you crunch some numbers?