I am shopping for a duplex in Salt Lake City, as a first time purchase and house hack. My game plan has been to put 5% down with an FHA loan. However, I am having trouble finding any properties where the numbers work, and questioning whether I should put 20% down in order to cover my expenses.
I am focusing on good areas of the city, as this is intended to be a long term buy and hold. I plan to rent to long term tenants. I run a small business that takes much of my time, so my time (and experience) is limited. My initial plan has been to put 5% down, and once the dust has settled on the purchase, and my costs are stabilized/more foreseeable, invest a good chunk of the remainder of my nest egg into index funds.
I may be able to make 20% down work on the most inexpensive options in the areas I am looking, however it will stretch the limits of my nest egg (to clarify, I would be leaving a personal safety buffer/slush fund, and not spending my last dollars on downpayment. But I would likely not have money left over for investing in index funds, or for much improvements to the property if they are needed).
I don't intend to change the areas I am shopping in order to achieve better ROI - I want to stay focused on good areas of the city. My metrics for a 'good deal' would be to cover cost of mortgage + reasonable expectation for expenses. I am not concerned with initial cashflow, as long as I am not purchasing a cash drain.
It may be that I simply need to hunt harder or get more creative to find a deal under market value. My concern with this is that it may keep me on the sidelines much longer.
On the flip side, the duplexes that are listed, in which the numbers don't seem to make sense, continue to go under contract - the numbers make sense for someone. Do I need to suck it up and pay 20% like investors are expected to, and breathe easy knowing I am not over-leveraging myself, and not wasting money on MIP?
I make enough money from my business to live on. I am not seeking cashflow. Rather, I am seeking to build equity and long-term wealth as well as eventual retirement support, as my current business would not allow for any income once I take my foot off the gas.
Any thoughts from the more seasoned folks out there? Thank you for any wisdom you might share!
Nick
