Why Rent When You Can Buy?
I had helped many first time home buyers overcame the perceived obstacles and made the home purchase-investment a reality fast. And I can help you too!
Fast Track to Become A Millionaire
How a first time home buyer became a real estate investor in year 2019.
Nicole came to my real estate Meetup to learn about home inspection two years ago. She was planning to invest in real estate since the housing prices had been picking up rapidly.
At that time, she was working multiple jobs in the food and hospitality industry trying to save up enough money for the down payment.
Instead of looking for a fixer to gain the potential extra equity appreciation, I suggested that she look into buying a 2 – 4 unit multi-unit single-family home. The benefits are
- As As a first-time homebuyer, she can qualify for a low down payment home loan, as low as 3% – 5%, for the 1– 4 unit property. Three percent of a one million dollar property is only $30,000, which is a reachable savings goal for her.
- As a multiple family property, she can live in one unit and rent out the other units. And 75% of that rental income can be used as a qualified income for a higher loan amount. Plus, the rental income can pay for part of the mortgage payments and help her build up the equity.
I consulted her on the lending guidelines, and we worked together for over a year. She paid off some credit card debt and got her credit scores up. She turned her 1099 contractor job into a w-2 employee job and still works at two other part-time jobs, which she had been working at already for two years.
While she was saving for the down payment, increasing her total monthly income, and looking for potential property to purchase, I was running the home loan numbers and letting her know whether the particular property she was interested in would be a financial fit for her or not.
We balanced between the required down payment, qualified income, potential rental income, total expenses, and the current interest rates.
Twisted and turned. Hoped and prayed.
Through hard work and determination, she finally brought a 3 unit property at the price of $730,000 in 2019.
She lives in one small unit and rents out the other two larger units. And the numbers work out great -
Purchase price = $730,000
5% down payment = $36,500
Title + Escrow + Prepayment = $8,913
Seller credit for some repair = $5,000
She bought the $730,000 property with less than $45,000 cash.
With a 30 year, fully amortized fixed interest rate at 4%, her total monthly housing payment is about $4,375—which includes principal, interest, mortgage insurance, property tax, and homeowner’s insurance.
The total income for 2 unit 2 bedroom apartments in Los Angeles is $2,000 x 2 = $4,000.
Her net monthly housing payment is $4,375 - $4,000 = $375.
Considering the tax benefits of owning a property, Nicole said the property is paying for itself.
Suppose she keeps the property for 30 years and housing values appreciate 5% each year? She is destined to be a millionaire for sure!
She was an immigrant to California, a single woman at the time and without any family financial support. But she held on to her dream and worked hard. In just 1– 2 years, she made her dream come true. I am so proud of her and so thankful for Fannie Mae, Freddie Mac, FHA and VA for those low down payment programs helping first-time home buyers.
Recently, I sent her a happy birthday note, and she replied that she is saving money to buy her next dream home.
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