Hi folks, wanted to ask for some advice/thoughts.
- 23 y/o in Texas
- Current salary $77k, will be $86k in Feb 2018
- $63k in savings, $26k in 401k, $30k in state retirement system (not accessible until separation from job)
- 760 FICO score, was 800+ until I paid off my truck
- Living at home currently. Not paying rent. No debts.
Thinking about getting an investment property and possibly a home for myself.
Thinking about buying around a $140-150k rental property (single family dwelling). Have only spoken with one lender so far (BofA) who said I would have to put 20% down since it's a rental. Factoring 3% for closing costs for a total cost of $34,500. Would finance on 30yr mortgage. This would leave me with around $30k still left in savings. I would rent this house out and hopefully have positive cash flow.
I'm also ready to move out of the parents and get my own place. The homes I like are around $250-275k or so. I would wait until Feb 2018 (when I get my raise) and save aggressively until then. I estimate I could save an additional $13k by then for a total savings of $43k in Feb 2018. I'd be unable to put 20% down on my personal property since the rental took a big chunk out but I could put 7-10% down on it (factoring 3% for closing costs and a house at 275k, this would cost ~$36k).
Questions...
1) What are your overall thoughts on this strategy?
2) Does it matter whether I get a rental first and then the personal residence? Or should I flip flop this around? If I get my personal residence first, should I put 20% down on it? That would take a big hit on my savings and delay buying a rental as I would have to build up my savings again.
3) Another strategy I've thought is buying the 1st rental as described but instead of buying a personal house, I would get an apartment. Monthly rent would be less than the mortgage on a 250-275k house and I wouldn't have to put a down payment. I could take this extra savings (and hopefully positive cash flow from rental) and build up my savings until I can buy a second rental. I'm thinking I could save at least $1500 a month (netting $4200 a month, minus $1500 for apt rent, and $1200 for living expenses). If I can work one overtime shift a month I could save an additional $700 for a possible total savings of $2200 a month. I feel like this method would allow me to build up my savings again quickly so I can buy rental property #2.
--- One of my concerns if I got two rental properties before a personal one would be my debt-to-income ratio would be too high to afford a personal residence. As in:
Rental Property 1 - 150k house, monthly mortgage of $1000 Rental Property 2 - 150k house, monthly mortgage of $1000
43% debt-to-income ratio at $86k salary - $3081/month
I already have $2000 in 'debts' from my two rentals, leaving me with only roughly $1000 before I reach the max debt-to-income ratio. The homes I like would have a monthly mortgage in excess of that.
Do the banks still factor the rental mortgages as debts even if you have tenants and positive cash flow? If they did, would I be restricted to a mortgage that kept me within my debt-to-income ratio?
I'd love to hear some of yalls advice! These are just some ideas I've thought about. It's all new to me so I just wanted to explore some possible options. Thanks again.
Submitted October 11, 2017 at 11:36PM by DTGH9 http://ift.tt/2yhVqp7
