Ok MMM hive mind, I need some help thinking something through. I’m 42, single, and started my mustashian path fairly late. I now find myself in a spot where I’ve got some FU money put away and am starting on investing in real estate in a small way. I own a home in Michigan and recently took a good paying job in OR and currently paying rent here while collecting rent for my place in Michigan. I want to buy here because I hate paying someone else’s mortgage. I’m looking for a multifamily a large 3-4br with a 1br unit. I’d live in the one bedroom and rent out the larger part to cover most of the mortgage. A place like this runs $600,000-$700,000 here. If I get an FHA loan I can do 3.5% down. I can afford the down payment, and with renting the larger unit I can afford the monthly. However, my Michigan house is currently on and FHA and you can’t have two at the same time. I would have to refinance the Michigan house to a conventional investment property loan. With closing costs, and some equity contribution to get the refi to 75% loan to value I would be out of pocket about $11,000. Down payment and closing costs on a place here would then be around $30,000. So, in about three months my liquid reserves drop to about $20,000 (I save around $2,500/mo).
A note on life goals. I plan to work out here for a another few years because the pay is way better, but ultimately resettle back in Michigan.
So, with limited reserves does buying an asset that mostly pays for itself, in a decent mmarket make sense. What am I missing? I welcome all thoughts on this because I’m cautious when I get excited about something and need people to shoot holes in it.
My current situation
Income
Job: $81k annual. After taxes $55k/$4,571mo
Michigan rental Income: $1,175
Personal note payments: $1,136
Expenses:
Personal living expenses: $2,000/mo
Michigan rental expenses: $1,050/mo
Assets:
Cash(bank): $24,000
Michigan house: $140,000
Index fund balance: $37,000
Personal note: $35,000
Liabilities:
Michigan house mortgage balance: $116,000