Is it worth paying PMI to get into REI quicker, or save for 20%?

[David DuCharme]

Something that I’ve been debating for a while now. I am an existing homeowner $125K value with $895 monthly payment. My other debt payments total $251 per month. My income is $75,000 annually. I’m 23 years old and want to dive into real estate early so I can drop this 9-5 bs eventually. My real estate strategy is roughly:

$150K Price Point

Central Pennsylvania

3 2BR- $900/mo or $2700/mo Otherwise

2000+ Sq Ft

Initial Investment

$30K Down Payment at 20%

$10K Rehab Fund

$10K Emergency Fund

My question is, should I wait until I can save a full $50K before diving into this, or does it make sense (if the cash flow works) to buy on a 3.5% down mortgage with the added PMI. I think this problem/dilemma is solved by the BRRR method. If completed right I should be able to increase equity to refinance out of PMI, no?

Thanks for any and all input.

[Bob Okenwa]

You cannot purchase an investment property with only 3.5% down. You're looking at 15% minimum. If you're house hacking and will turn your existing home into a rental and use the new investment home as your primary residence, then you can use a lower down payment as you have stated.

As for saving 20% down, how long will that take and how much more expensive will homes be in that time? One must consider the time value of money and see if it makes sense to wait or pull the trigger now as prices may continue to increase as well as interest rates and those cost increases need to be taken into account to make a sound decision in regards to moving forward today or waiting until tomorrow.