Hello,
So I have been thinking of investing in real estate in the NYC area. It’s my first time ever buying anything so I would like to run it by some experts. I would like to look at foreclosures in the area but I know that’s a whole different topic. So here’s the plan which I would like to move in by early fall:
buy a 2-3 bedroom condo - I plan on living in one and rent out the other(s)
put 3-5 % down deposit
I may be able to get my parents (homeowners for 20 years) to cosign the mortgage and I have EXCELLENT credit
After a couple of years of roommating I would like to live alone or have that place for my future family, etc. Can I also do an 80/20 mortgage since I’m a first time home buyer? Thank you for your kind help.
I have a few condos and for me I am just waiting for the market to come back to sell
They were a steal so I do make cash flow on them but the dues keep going up faster than rent and always will.
What you’re describing is more of a primary residence purchase. The fact that you’ll be renting out rooms to offset the cost is great. Because of the way you’re structuring the deal, you can talk to banks/mortgage brokers as if you are purchasing it to live in (which you are). That will give you a whole different set of financing options compared to purchasing “an investment property” in which case you’ll likely put down a significantly higher down payment.
I’m pretty sure 80/20s are a thing of the past, but FHA will go 97% Loan To Value for Owner Occupied mortgages, but they will put mortgage insurance on the note to the tune of 0.5% APR. Add this to your plan: fixed interest rate, lowest rate, longest mortgage you can get, direct amortization.
buy a 2-3 bedroom apt/house - I plan on living in one room and rent out the other(s)
put 3 % down deposit on a 97% Loan To Value for Owner Occupied mortgage
Convince my parents (homeowners for 20+ years) to cosign the mortgage and use my EXCELLENT credit.
Mortgage notes: fixed interest rate, lowest rate, longest mortgage I can get, direct amortization.
After 2-3 years live without roommates (unless it’s family), move out and rent out the whole unit, or resell the property hoping that by then the real estate market will be better than it is today.
If you love your parents, you will NOT put them at risk by having them co-sign a mortgage. Too many bad things can happen to them if this “investment” does not work out for you.
I don’t think it will matter if you have excelent credit. There should be no difference in terms. It will only put un-needed risk to the co-signer. Shop around and see what kind of terms are available.
A couple of caveats. You did not mention price. How much do you expect to pay for the property? Are you familiar with the prices of such properties you describe?
Also, you may be a little premature on the timing of your purchase. You, like many who have never been through a real estate turn down, feel the market will “get back on track” in a couple of years. Smart money is betting that prices will continut to Fall for another couple of years!
If you look at the history of the latest real estate booms, the 1970’s boom ended with prices going all the way back to pre-boom levels, same with the 1980’s boom, gave back all the upside before it got going again. Check out the Case-Schiller Index for proof. So far, we are only 1/4 of the way back down to the pre-bubble values, and most of the adjustable mortgages have not even reset yet! There is plenty of bad financial/real estate news that has not yet surfaced.
Zoning/Insurance considerations.
You should check with the zoning for the area you are purchasing in. Some areas have limits on the number of unrelated individuals that can live under one roof.
Also, if you have two roommates and you have a fire, the insurance company will investigate and if it turns out you were running a commercial rooming house, while you insured a single family dwelling…? let’s just say insurance companies did not get as rich as they are by paying claims!