STEP 2: The Downpayment
So, you want to grow your portfolio! You must love real estate investing as much as we do!
Step 2: Downpayment and Price Range
You know from experience that building up that initial down payment can take a lot of time. And doing it is the best way to get your foot in the door with real estate investing. However, to scale your portfolio, you have alternative financial strategies that could help you grow much faster than saving another down payment yourself. Here are some potential financial strategies that might work for you: the type of property you're buying and your risk tolerance.
Are you looking to house hack by purchasing a property with multiple units, renting out part of your home, or using a first-time homebuyer program that allows for a lower down payment? If so, you could put as little as 5% down.
Lenders often require 20% or more as a down payment if you're considering an investment property since rental properties are considered higher-risk loans.
On the other hand, the purchase price will depend on your income, current debt, and market conditions in your area. Research properties that fit your criteria—whether it's a condo, townhouse, single-family home, or multi-unit rental—and take note of their price ranges.
A good rule of thumb is to use a mortgage calculator and consult with a lender to estimate your total buying power. Consider additional costs like property taxes, insurance, and maintenance when setting your budget. It's essential to be realistic about what you can afford while maintaining a comfortable lifestyle and emergency savings.
Stay tuned for Step 3, where we'll dive into the next crucial phase of your home-buying journey!