Buying a House

Two days ago, I decided I want to buy my first house. My goal is to purchase it before the summer of 2025.

Why are you buying a house?

To make money. I see this as an opportunity in a space that many friends and family consider a safe, high-return bet (if done right). When joining Kibu, I took a pay cut in exchange for higher upside, executive responsibilities, and the opportunity to work on a great mission. That said, it’s time to use the money I’ve saved to explore additional revenue streams. Purchasing a home, making renovations, earning cash flow from renters, and watching the home’s value appreciate could be the revenue stream I’ve been looking for!

Where are you buying a house?

I will be buying a house in my hometown of Pittsburgh, PA. My parents and sister still live there, and we all have a good sense of the “best spots” in the city. I love Pittsburgh, and I can see myself visiting 2-3 times per year—especially with my recent move to NYC. On top of hometown knowledge, Pittsburgh is one of those “best value” cities, often getting acclaimed as one of the most walkable, affordable cities in America. Although I’ve just begun planning, I could see myself purchasing somewhere near my dad, close to a train line and some nightlife, like Mt. Lebanon, Mt. Washington, or maybe the Southside.

Can you afford to buy a house?

Anyone who’s debt-free, has good credit (720+), and earns a steady income can buy a house. However, factors like intent, location, and risk tolerance will decide if one can actually afford a house.

As I said above, I intend to purchase a house for investment purposes. That means the monthly mortgage and operating expenses must be less than the rent income I intend to receive:

Net Cash Flow = Total Rental Income − (Operating Expenses + Mortgage Payments)

Additionally, I need to determine if I can afford the house at the time of closing. Generally, a lender requires a down payment of ~20% of the home’s purchase price. However, as a first-time homebuyer, that payment can be considerably lower. An FHA loan could allow for a down payment as low as 3.5%, but that comes with added upfront and monthly premiums known as MIPs (Mortgage Insurance Premiums), which I would essentially treat as added mortgage payments.

As a rough estimate, homes in Mt. Lebanon and Mt. Washington range from $200k to $500k. Per advice on YouTube, I intend to speak with a local lender in Pittsburgh, evaluate my financials, and be told exactly what I can afford.

Who’s going to help you?

As a first-time homebuyer, this one makes me the most nervous. Even as I write this blog and browse Zillow, I get feelings of doubt. I need to find trusted mentors and professionals to guide me down the right path.

Mentors
  • My dad: I’ll look to my dad, a 40+ year Pittsburgh homeowner, to help search for neighborhoods. My dad has also mentioned he’d be willing to periodically visit the house after it’s purchased, which is immensely valuable for me as an out-of-state buyer.
  • Friends: I have two friends in mind who can share their homebuyer stories. One of them was in a similar position to mine: a new NYC resident who bought a house in his Texas hometown. Another friend is a serial real estate investor.
  • YouTube and ChatGPT: I will lean on all the internet’s free resources to help me get the dumb questions answered. ChatGPT is a game-changer for answering FAQs, as it can contextualize answers to my situation and provide solicit-free advice.
Professionals
  • Lender: A good lender will be responsive, transparent, and have a proven track record in first-time home buying.
  • Agent: A good real estate agent will have similar qualities to the lender, with strong connections to inspectors and contractors.

What’s your timeline?

  1. (Sep-Oct): Speak with a Pittsburgh-based lender and learn what I can afford.
  2. (Oct-Jan): Search for properties on Zillow, Redfin, and Craigslist. Perform back-of-the-napkin math on the mortgage, operating expenses, and estimated rent to determine if the house will be cash flow positive.
  3. (Jan-Mar): Visit a couple dozen homes in person. Look for patterns in why homes are valued the way they are.
  4. (Feb-Apr): Make offers.
  5. (Mar-May): Make home inspections. Use the data to negotiate credits or a reduced price on the home.
  6. (May-Jul): Renovate the house. Be onsite as often as possible to ensure work is being done in a timely manner.
  7. (Jul-Sep): Look for renters. Take professional pictures of the house and post it on rental sites.
  8. Profit??