{"id":14832,"date":"2021-11-03T15:00:00","date_gmt":"2021-11-03T19:00:00","guid":{"rendered":"https:\/\/www.renthop.com\/content-manager\/?p=14832"},"modified":"2021-11-03T15:01:34","modified_gmt":"2021-11-03T19:01:34","slug":"how-to-save-for-your-first-investment-property-as-a-renter","status":"publish","type":"post","link":"https:\/\/www.renthop.com\/blog\/how-to-save-for-your-first-investment-property-as-a-renter\/","title":{"rendered":"How to Save for Your First Investment Property as a Renter"},"content":{"rendered":"\r\n
Are you wondering how you can get started in real estate? If you\u2019ve never owned a home before, investing in property can seem like a daunting task. But, by breaking up the process into actionable steps, you\u2019ll be on your way to being a landlord. The first thing you want to do is take control of your finances. This includes setting a savings goal, consolidating student loans, and reducing your monthly expenses.<\/p>\r\n\r\n\r\n\r\n
Here\u2019s how you can get started:<\/p>\r\n\r\n\r\n\r\n
The first step in saving up for anything is to take an honest look at your finances. A few questions you want to consider are:<\/p>\r\n\r\n\r\n\r\n
If you don\u2019t have a hefty amount of savings piled up, you\u2019re not alone. 56% of Americans have $5,000 or less in savings. However, if you\u2019re serious about owning an investment property<\/a>, you\u2019re going to have to make some adjustments. The 50\/30\/20 rule is a great tool for looking at how much you can afford to put away each month. Here\u2019s how to use it:<\/p>\r\n\r\n\r\n\r\n 1. Take your total monthly income and allocate 50% to mandatory\/fixed expenses. This should include your rent, groceries, phone bill, student loan payments, car payments, and any other expenses you deem absolutely necessary.<\/p>\r\n\r\n\r\n\r\n 2. Next, allocate 30% of your income to spending. This includes anything you enjoy doing for leisure including travel, shopping, dining out, gym memberships etc.<\/p>\r\n\r\n\r\n\r\n 3. The remaining 20% should go directly to your savings account. Don\u2019t Trust Your Will Power. Automate Your Savings Instead. Saving up for a home will prove to be a challenge to anyone who does not exercise self control. It will most likely take months for you to be in the financial position to purchase, maintain, and manage your first property. This is why it\u2019s important to have systems in place that override your desire to spend when saving for a home.<\/p>\r\n\r\n\r\n\r\n Once you\u2019ve established a consistent income stream month-to-month, automate your savings. Keep them in a separate account if possible. Avoid touching that account until you\u2019ve reached your target goal. It may take some time, but it will be well worth the wait.<\/p>\r\n\r\n\r\n\r\n One of the biggest barriers to homeownership is high amounts of debt. Between student loans, credit cards, car notes, and other monthly expenses, aspiring property owners have a lot to tackle. If you want to increase your chances of getting approved for a mortgage loan, you want to keep your debt-to-income ratio below 36%. Anything above this and lenders consider you high-risk.<\/p>\r\n\r\n\r\n\r\n Take inventory of all your debts and come up with a realistic plan to pay them down. See where it is you can consolidate and lower interest rates. Negotiate lower balances by offering lump sum payments. Every step you take towards lowering your debt is a step closer to homeownership.<\/p>\r\n\r\n\r\n\r\n You also may want to consider how you can increase your monthly income, whether it be asking for a raise at your current job, switching jobs, or starting a side hustle.<\/p>\r\n\r\n\r\n\r\n Down payments for investment properties are typically 20%-25% of the total property value. For a first-time investor, this percentage can be a bit overwhelming. Luckily, there\u2019s a way around having to pay such a large amount of money upfront. The FHA Loan Program<\/a> backed by HUD offers an alternative solution. If you\u2019re open to living in your investment property, while renting out the remaining floors, you should consider applying for an FHA loan. FHA mortgages allow for down payments as low as 3.5% on properties with 1-4 units. This program is also helpful for those with poor or no credit history as well as low-income families.<\/p>\r\n\r\n\r\n\r\nMake a Long-Term Plan to Pay Down Personal Debt<\/h2>\r\n\r\n\r\n\r\n
Secure a Large Down Payment or House-Hack with an FHA Loan<\/h2>\r\n\r\n\r\n\r\n
Factor in Operating Expenses and Unexpected Costs<\/h2>\r\n\r\n\r\n\r\n