First Home and Another Investment Property

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YoungAndNew2This
Posts: 8
Joined: Sun Jan 08, 2017 10:55 am

First Home and Another Investment Property

Post by YoungAndNew2This » Sun Mar 19, 2017 10:55 am

Something occurred to me while at work, and I'm strongly considering it however I don't have enough information to know if it works or if its a good idea.


Age: 26
Current Salary: 120 Gross / 15% annual bonus
Savings: 100K
Debt: Student Loans 40K

I live in CA and I'm at the time where I'm considering buying my first home, however, I'm starting to think about buying two homes, as I'm not doing anything with my current savings and its sitting in the bank.

Would it be a good idea to buy one home, 450K, with an FHA loan and the other home, 450K, with 20% down tradition loan, and live in the traditional home and rent out the FHA loan home to report it has a loss? Rent in the area is pretty close to purchase rent. I'm unsure if I will qualify for two homes, but I figured it may be a great idea. That way I have two great assets at a young age.

Jags4186
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Re: First Home and Another Investment Property

Post by Jags4186 » Sun Mar 19, 2017 10:59 am

You don't have enough cash to close, you can't qualify, and you'd have monthly PITI payments of about $5100/mo. I would vote no.

Grt2bOutdoors
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Location: New York

Re: First Home and Another Investment Property

Post by Grt2bOutdoors » Sun Mar 19, 2017 11:06 am

You can have something, you just can't have everything. Biggest problem: you don't know enough about being a landlord and associated issues that come along with it. Losses, will be both intentional and not so intentional. It's the latter that should scare you the most. They are as real as it gets in losing "real" money and time.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

YoungAndNew2This
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Joined: Sun Jan 08, 2017 10:55 am

Re: First Home and Another Investment Property

Post by YoungAndNew2This » Sun Mar 19, 2017 11:08 am

Thanks for the help. Looks like I'll just skip this idea and maybe do it sometime in the future when I have more money saved up.

orca91
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Re: First Home and Another Investment Property

Post by orca91 » Sun Mar 19, 2017 11:14 am

So, you want to buy a home to live in, a home to rent out, cash in all your savings, and you have student loans... and all just to get a tax write off? What could possibly go wrong with that?? :wink:

Very risky and bad plan. Not to mention you would likely not qualify for $900k worth of home, let alone clear all the hurdles along the way to owning them.

Nothing wrong with buying yourself a home though.

YoungAndNew2This
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Re: First Home and Another Investment Property

Post by YoungAndNew2This » Sun Mar 19, 2017 11:26 am

Does anyone happen to know a good excel sheet or location I can find all the necessary/hidden cost in home purchasing?

Since this being my first one, I'm unsure of all the costs or % of cost. (i.e. closing costs, mortgage insurance, property taxes, cash reserves, etc.)

Slacker
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Re: First Home and Another Investment Property

Post by Slacker » Sun Mar 19, 2017 11:34 am

With what you suggest, have you looked into purchasing a Duplex? You live in one side and you carefully screen your tenants for the other side. Kind of lets you pick your neighbors and in many cases (I don't know about CA real estate) you can end up having most of the entire mortgage covered by your tenant's rent payments. You can still use any type of loan for the duplex (FHA, VA, Traditional, etc), you don't have to drive far to do the minor maintenance items on the rental property. If this idea intrigues you in the least, search for the terms "house hacking" and read up more on the pros and cons of attempting this. One con I can think of right now is that typically you can only sell a Duplex to an investor as few owner occupants would want to purchase a duplex.

orca91
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Re: First Home and Another Investment Property

Post by orca91 » Sun Mar 19, 2017 11:57 am

YoungAndNew2This wrote:Does anyone happen to know a good excel sheet or location I can find all the necessary/hidden cost in home purchasing?

Since this being my first one, I'm unsure of all the costs or % of cost. (i.e. closing costs, mortgage insurance, property taxes, cash reserves, etc.)


You seem to have a pretty good handle on it with your i.e. list there. If you put enough down or have access to the VA loan, you can and should prefer to avoid PMI or mortgage insurance. That's only lost money to you.

Here's a good site to study and read through... https://mtgprofessor.com/home.aspx

Read through the articles and questions... lots of good info.

The other stuff... well, houses cost money. Repairs, furnishing, appliances, changes you might want to make, and on and on. Property taxes depend on the state and area. Closing costs can depend on the lender and points or rebates, if any. Getting an inspection done is always a good idea. Homeowners insurance.

Carefreeap
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Location: SF Bay Area

Re: First Home and Another Investment Property

Post by Carefreeap » Sun Mar 19, 2017 12:10 pm

How about one property at a time?

FHA can be a wonderful program for folks first starting out. You can buy with low down and keep a healthy reserve for that stuff you didn't plan for. If you think you want to be a LL buy something that gives you the most flexibility; in my experience that would be a starter 3/2. After being a homeowner for a couple of years you can decide whether you want to be a LL. At that point you could buy another SFR and rent out your old one. Rinse and repeat if desired.

Remember there's no shame about realizing that you don't want to be a LL. At a minimum it's a part-time job. While it can be a great tool for wealth you might want to spend your time doing something else. :wink:

YoungAndNew2This
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Re: First Home and Another Investment Property

Post by YoungAndNew2This » Sun Mar 19, 2017 9:35 pm

Thanks for the help everyone.

I work in construction and I think this is right up my alley, but home buying is new to me.

I'm going to research more, but I plan to get (1)FHA home towards the end of the year and I'll save the rest for the right time. I believe PMI is a tax right off as well, but i'll need to double check that.

I currently drive 2 hours to work and pay 2300 for apt rent at my current location, whereas a home would cost my around the same near work.

Thank you for the help everyone.

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BL
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Re: First Home and Another Investment Property

Post by BL » Sun Mar 19, 2017 10:29 pm

What are the interest rates for your student loans?

YoungAndNew2This
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Joined: Sun Jan 08, 2017 10:55 am

Re: First Home and Another Investment Property

Post by YoungAndNew2This » Sun Mar 19, 2017 11:40 pm

BL wrote:What are the interest rates for your student loans?


Interest rates range from 3-6%. I've considered paying them off faster, but I rather have the capital handy for home, emergency, etc..

Knowing the upfront cost of purchasing a 450K home would help. Thought of unknowns for me.

I would imagine having a child in the next few years and the last thing I would want is not to have a safety net. CA is expensive and scary.

I'll think more about it the next few days. I'm sure slowing paying off extra here and there wouldn't hurt.

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