Author Topic: Considering buying when lease is up - Funding advice  (Read 392 times)

actonyourown

  • 5 O'Clock Shadow
  • *
  • Posts: 14
Considering buying when lease is up - Funding advice
« on: November 18, 2018, 10:40:50 PM »
My lease is up in April 2019.  My rent is kind of high for an apartment, but since learning about FI, I really want to buy a duplex and rent one side out.  I am handy at times and my dad would be willing to show/help me soon after he retires in the next year or two.  That being said, I don't have much in the way of savings besides my 401k.  I have some student loan debt, however, I should have it down to a reason able level before my lease is up.  My DTI is <33% currently, and i expect it to be <25% by April.

  • What is the opinion of the community of borrowing from a 401k to fund a duplex/triplex (as a first home) purchase? I could comfortably borrow $15,000 without worrying about a call if the market dropped.
  • Does it make sense to buy a house when my debt is still relatively high compared to my income?
  • Would it make more sense to try funding through friends/family by creating an LLC for partners?

MommyCake

  • Stubble
  • **
  • Posts: 187
  • Location: NJ
Re: Considering buying when lease is up - Funding advice
« Reply #1 on: November 19, 2018, 06:03:48 AM »
Your DTI sounds high at 33%.  I would be concerned about getting approved for a mortgage.  What percent of your income would the mortgage be?

I don't think it makes sense to create an LLC for your primary residence.  If you can't afford it yet, save for another year. 

actonyourown

  • 5 O'Clock Shadow
  • *
  • Posts: 14
Re: Considering buying when lease is up - Funding advice
« Reply #2 on: November 19, 2018, 06:23:15 AM »
I can't say what percent it would be since I havent been looking at properties yet and I'm uncertain what it would cost exactly. Right now I spend around 17% on rent.

Thanks for the advice!

rothwem

  • Bristles
  • ***
  • Posts: 429
  • Location: WNC
Re: Considering buying when lease is up - Funding advice
« Reply #3 on: November 19, 2018, 06:33:49 AM »
*Dont borrow from 401k.
*Make sure the duplex you buy will make money/cash flow with both sides rented.
*Dont buy the duplex if it’s going to break you to float the full mortgage for a couple months if your tenants leave.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3025
  • Location: Emmaus, PA
Re: Considering buying when lease is up - Funding advice
« Reply #4 on: November 19, 2018, 07:02:07 AM »
What’s the rate on your student loans? Could be a much better investment than a duplex.

actonyourown

  • 5 O'Clock Shadow
  • *
  • Posts: 14
Re: Considering buying when lease is up - Funding advice
« Reply #5 on: November 19, 2018, 05:45:20 PM »
What’s the rate on your student loans? Could be a much better investment than a duplex.
That has been my target over the last year.  A few of my loans are 6.8% or 6%.  My overall effective rate is 5.08%.  I pay off a full loan once I feel I have enough liquidity to handle getting rid of the loan.  My lowest rates are 3.5% and 4.5%.  I'm going to pay off the others and then ride those two loans to maturity unless I have nowhere else to put it.  Before anyone asks, I looked at consolidating my SL and SoFi wouldn't do it unless I had $25,000 or more, but I didn't at the time and I never to again.  At this point, I'm pushing 30 and can't wait to get that noose off my neck.  I would like to have a second income stream and reduce my housing costs to which this seems like the best of both worlds.

Thanks for the advice everyone.  I will post here again if anything changes :)