Oct
29
2024

Tips for Overcoming Situational Poverty

By | events, Financial Independence, Life & Career | Comments Off on Tips for Overcoming Situational Poverty

There are unfortunately many things in life that can rock a person’s financial stability, ranging from divorce to a devastating flood. Situational poverty is a type of poverty that occurs due to a sudden change in circumstances such as a major life event or natural disaster.

If you’re in the grip of a situation like this, it can feel impossible to get back on your feet. But it is indeed possible to overcome situational poverty. Using a variety of techniques, it’s often possible for people to pull themselves out of a difficult and painful moment. Here’s a closer look at what causes situational poverty and how to break out of a poverty cycle once it starts.

Key Points

•   Situational poverty often arises from sudden life changes, such as natural disasters or personal tragedies, and is typically temporary compared to generational poverty.

•   Access to education and financial literacy plays a crucial role in overcoming situational poverty, helping individuals make informed financial decisions and improve their circumstances.

•   Establishing supportive relationships, such as finding mentors and connecting with well-informed organizations, can provide guidance and resources essential for escaping poverty.

•   Utilizing community and government resources, including financial assistance programs, can offer critical support to those experiencing situational poverty and aid in recovery efforts.

•   Developing a positive money mindset, setting clear financial goals, and practicing good budgeting habits can empower individuals to break the cycle of poverty and achieve stability.

What Is Situational Poverty?

Situational poverty is a type of poverty that is the result of a sudden or severe crisis. It usually has a specific cause or triggering event, and the financial difficulties may be only temporary. Those in situational poverty may have ways to steadily improve their finances.

This is in contrast to generational poverty, where at least two generations of a family are born into poverty. In this case, poverty is largely the result of circumstance; people don’t have the knowledge or skills to escape poverty, so often their finances do not improve.

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Reasons for Situational Poverty

Situational poverty is often the result of a sudden or severe crisis in a person’s life. While there are many events that may lead to situational poverty, they are often temporary. Here’s a look at some of the triggers that can cause this sort of disadvantaged scenario.

Being Born Into a Disadvantaged Background

Being born into a disadvantaged background can contribute to situational poverty; it can also be a factor in generational poverty, which requires at least two generations to be born into poverty.

In terms of situational poverty, if you were born into poor circumstances, even if your parents had been wealthier earlier in their life, it may still be difficult for you to get ahead financially. You might face issues like lack of access to medical care and educational resources. You don’t get that boost into financially stable adulthood that some people do.

Making Bad Financial Decisions

When you are grappling with poverty, you may wonder, why am I so bad with money? But it’s not uncommon for people to make a series of unwise money moves and wind up in poverty as a result. Perhaps you made a bad investment or took on a large debt (say, a mortgage) that you couldn’t keep up with. Or maybe you poured all your savings into a business idea that didn’t succeed. Sadly, these things happen every day. In some cases, the consequences of these sorts of decisions can trigger situational poverty.

Experiencing a Tragedy

It’s painful to think about it, but there are many types of tragedies that can send a person’s finances into a downward spiral. For instance, you might lose your house in a hurricane or your spouse (with whom you share your finances) might die unexpectedly. These events can leave a person without the means to live above the poverty line.

Lack of Good Education

Education is a path out of poverty, and sadly, the inverse is also true: Not getting a solid education can lead to a person not succeeding financially. They may lack the skills to earn higher wages.

Lack of financial education, such as the importance of an emergency fund and how to manage your finances, can also result in or contribute to situational poverty. Unfortunately, many U.S. high schools don’t require personal finance education as a graduation requirement. As a result, many people enter adulthood without basic financial skills like how to open a new bank account, set up a basic budget, and avoid “bad” debts.

Tips for Breaking the Vicious Cycle of Poverty

The scenarios above reveal some of the ways that a person can slip into poverty. Once you’re in that situation and possibly struggling to pay bills, however, it can feel impossible to climb your way out. Fortunately, there are several paths that may help you rise up and get on better financial footing. Here, some ideas for how to get out of situational poverty.

1. Getting a Sound Education

A good education — and specifically a good financial education — is one of the first steps toward getting out of poverty. While financial education classes in school are ideal, you can still learn the basics on your own, even as an adult. For example, the FDIC’s How Money Smart Are You? can help you learn the basics. Many universities and organizations also have personal finance courses for adults. You can also find free educational materials online that can help boost your financial IQ and guide you towards making money-smart choices.

2. Having a Close Mentor

Having a great mentor is one of the best ways to get a leg up in life, and the same applies to escaping situational poverty. A career mentor can help you gain the skills and experience you need to find (or find a better) job, while a financial mentor can help you learn how to budget, save, and ultimately break the cycle of poverty.

It can take some searching but you may be able to find a mentor where you work or by networking with friends, family members, and neighbors. People who have achieved success and escaped poverty themselves are often happy to give back by helping others in the community.

3. Working With Well-Informed Organizations

Another way to improve your financial literacy and learn how to overcome situational poverty is to work with trusted organizations. There are a number of nonprofit groups that specialize in different aspects of personal finance that could be holding you back. For example, the National Foundation for Credit Counseling (NFCC) helps people who are saddled by large amounts of debt. Operation Hope provides financial education to underserved communities, while Accion is a nonprofit that is focused on bringing financial technology and tools to underserved communities.

4. Utilizing Community and Government Resources

There is no shortage of community and government resources that can help if you are experiencing situational poverty. Churches, schools, community centers, and public libraries can offer support within your community.

Beyond your community, there are extensive government resources that can also help. For example, you might qualify for benefits like SNAP (Supplemental Nutrition Assistance Program) or the child tax credit. There are dozens of government programs that use poverty as a qualifying criterion. The U.S. Department of Health & Human Services (HHS) has a list of programs on its website.

5. Changing Your Money Mindset

Your mindset can hold you back just as much as it can empower you. It’s worthwhile to try to improve your money mindset. Something that is important to remember is that situational poverty is often temporary.

This is especially true if a bad financial decision or a natural disaster was a major contributor to your lack of funds. These are passing, albeit difficult, moments. By leveraging some of the resources mentioned in this article and practicing financial self-care, you can make progress.

6. Setting Financial Goals

Setting financial goals is important whether you are experiencing poverty or not. But it is even more important when you are hoping to build up your financial resources. Money goals can help you work toward something specific. Consider taking some time to map out what steps you want to take to move through your situational poverty. Some common goals are developing a budget with positive cash flow and paying down high-interest credit card debt.

7. Cutting Expenses and Spending Wisely

One aspect of budgeting that can help you pull yourself out of a tough financial spot is cutting any nonessential expenses, and then funneling that money towards your goals, such as paying down debt (more on that below) or taking a class to learn a skill that can help you get a promotion or a higher-paying job.

To “find” money, it can help to look at your current expenses and see where you may be able to trim back. For example, if you have any streaming services, you might pause them until you have your finances in order. Or if you have a cell phone plan, you might switch to a prepaid plan so you aren’t being charged automatically and can take control of your spending. You might also negotiate lower interest rates by calling your credit card issuer; this tactic may yield rewards.

8. Paying Down Your Debt

If you have large amounts of debt, you’ll want to prioritize paying down those with the highest interest rates first. You might look into a balance transfer credit card, which may give you no or low interest for a period of time. That can help you whittle down debt as it gives you some breathing room from a high annual percentage rate (APR). If you can qualify for a low rate on a personal loan, you may use it to consolidate your debt. Working with a non-profit credit counseling organization is another option to help you manage this common aspect of poverty.

Recommended: What is the Average Credit Card Interest Rate?

9. Avoiding Payday and Predatory Loans

Payday loans offer cash advances before payday to those who need cash quickly, but this money infusion can really cost you. These loans typically have extremely high interest rates. Even with state laws limiting fees to no more than $30 per $100 borrowed, you could still end up paying the equivalent of 400% interest or more. And if you are unable to pay back a payday loan, you may end up in a debt cycle that can be difficult to break out of.

10. Making Saving a Priority

Saving is generally always smart, but situational poverty can highlight its importance. When you’re financially vulnerable, any expense you aren’t expecting could really rock your situation. A big medical or car repair bill could be a huge problem.

Even if you don’t have the means to put much aside, even a small contribution to savings each month can slowly but surely add up to a solid cash cushion over time, especially if you put the funds in a savings account that pays a competitive rate, such as a high-yield savings account. This allows your money to grow just by sitting in the bank. As your finances improve, you can gradually increase how much you siphon off into savings each month.

11. Finding Out Where You Stand

Finding out where you stand can be a powerful exercise. We tend to be our own biggest critics, and that applies to finances, too. When you take a look at the numbers (go ahead and really study your income, cash outflow, assets, and debt), you might find you are doing better than you think.

Granted, this may not be the case when you first find yourself in situational poverty. But as you start to work on things, you might find your debt declining. Or that your savings by age is better than you expect. That can give you the confidence boost you need to keep exercising good financial habits and continue to improve your situation.

Also, even if you are in the midst of situational poverty and your status isn’t great, you will at least know exactly where you are. That benchmark will be what you build from.

The Takeaway

Situational poverty is a type of poverty typically caused by a life event, such as a divorce, severe health problems (and the resulting bills), or a natural disaster. This type of poverty is usually temporary and can often be overcome by boosting your financial education, accessing community and government resources, and prioritizing debt elimination and saving.

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FAQ

How can I overcome a poverty mindset?

Overcoming one’s mindset is often a key step to getting out of poverty. Here are some ways to break out of a poverty mindset and feel more empowered:

• Set achievable financial goals and celebrate small victories to build confidence.

• Educate yourself on personal finance through books, courses, and mentors.

• Surround yourself with positive influences and avoid those who reinforce negative stereotypes.

• Practice gratitude to appreciate what you have.

• Cultivate a growth mindset by seeing challenges as opportunities for learning.

How do I know if I am poor or not?

The federal poverty guideline for 2024 for the lower 48 states and D.C. is an annual income of $15,060 or less for an individual. For a couple, poverty is defined as an annual income of $20,440 or less. For a family of four, it’s defined as an income of $31,200 or less.

How many people are in situational poverty?

It is difficult to know exactly how many people live in situational poverty. However, a large number of people live in poverty in general. According to the latest data from the U.S. Census, the official poverty rate is 11.5% of the population, with 37.9 million people living in poverty.

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SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Aug
06
2024
Does Auto Insurance Roadside Assistance Cover Keys Locked in a Car?

Does Auto Insurance Roadside Assistance Cover Keys Locked in a Car?

By | events, Insurance, servicing | Comments Off on Does Auto Insurance Roadside Assistance Cover Keys Locked in a Car?

Roadside assistance coverage is designed to help motorists in trouble get back on the road. That usually includes helping drivers who have locked their keys in their car. Keep in mind that some plans place an annual limit on the number of calls for service or the amount they’ll reimburse you for specific services — including lockout assistance.

Read on for more information about what to expect when you sign up for auto insurance roadside assistance.

How Much Does It Cost to Unlock a Car?

If you don’t have roadside assistance and lock your keys in the car, expect to pay as much as $300 to have a locksmith come to your aid. The price varies depending on several factors, including the time of day, age and model of your car, and how far the locksmith has to drive. If you’re close to where the locksmith is working and your call comes in during normal business hours, the cost could be closer to $75 to $150.

There may be additional fees, however, if you’ve lost your key completely (rather than locking it in the car) and the locksmith has to cut a new one for you.

But if you do have roadside assistance coverage, all or some of the cost could be covered. Some plans cover getting you back into the car, for example, but not the cost of a replacement key, key fob, or repair of a damaged keypad.

Recommended: Ways to Save Money on Car Maintenance

Should You Call Roadside Assistance to Unlock Your Car?

When deciding whether to call roadside assistance to unlock your car, think safety first. If you’ve had an accident, locked a pet or child in the car, or feel in danger in some way, make 911 your first call.

But if you feel safe, roadside assistance is probably your best bet. You’ll get help quickly and with the least amount of risk to you, any passengers, and your vehicle. (Just remember to program the number into your phone.)

Common Roadside Assistance Service Benefits

Roadside assistance can be useful when you’re stranded on the side of the road and need a repair or some other type of service. This can be especially important for seniors, new drivers, people with a physical disability, and parents of young children.

Here are some of the most common circumstances for which a motorist might use roadside assistance:

Towing

If your car can’t be quickly or safely repaired or restarted where it is, roadside assistance can have it towed to a nearby qualified repair shop.

Battery Jump-start

Roadside assistance can jump-start a dead battery. In some cases, they may be able to install a new battery on site.

Flat Tire Change

Sometimes it just isn’t possible to get out and change your own tire on the roadway. Roadside assistance providers are trained to take care of flats on scene — if you have a spare available — or have your car towed to a location where the tire can be changed.

Emergency Fuel or Electric Car Battery Charge

If you run out of gas, roadside assistance may offer free fuel delivery to your location. And if the battery on your electric vehicle needs a charge, you may be able to have your car towed to the nearest charging station at no cost. (However, expect to pay for the fuel or the battery charge.)

How to Choose the Right Roadside Service Provider

Before you go shopping for coverage, check to see if it’s already provided by your auto insurance, vehicle manufacturer, credit card company, or an organization with which you’re associated. Customer reviews can indicate how reliable a provider is.

Be aware that some plans that come with a new car cover you for only a limited period of time, from a few months (as with a free trial) to a few years (such as the length of your limited warranty).

Roadside assistance is typically offered for an annual fee. Some plans provide only the basics (which usually includes lockout service), while others offer several tiers of benefits. When choosing your level of coverage, know that cheaper plans often have lower limits on the numbers of calls you can place, or cover only a portion of towing and other services. Read the fine print to make sure you understand what you’re getting. It can also help to get up to speed on how car insurance works.

Has your insurance gone up after an accident? If you’re doing some personal insurance planning, see whether a new auto policy might fit in your overall strategy.

Recommended: How to Lower Your Car Insurance

Ways to Get Your Car Open If You’re Locked Out

Locking your keys in your car is a maddening experience, especially when you’re running late or alone in a dark parking lot. If you’re stressed out, you may want to call for help right away. But if you’re up for trying a DIY break-in, here are a few tips.

Use a Wire Hanger

If your car has a manual lock, you can try threading a hanger or similar tool through the rubber gasket around the driver’s side window and into the door frame to pull up the lock-pin. Keep in mind that this method can damage your car, which could cost more than waiting for a pro.

Go Through the Trunk

If your trunk is open, you might be able to access the backseat. Check to see if there’s a panel you can push that allows you to crawl through to the car’s main interior.

Turn Your Phone Into a Digital Key

If you’ve already added a digital car key to your smartphone, now is the time to try it out!

Get the Key Code to Make a New Key

After the roadside assistance service person verifies that the car you want to get into is yours, he or she may be able to get the key code from the manufacturer or dealer (or by using decoding tools) and cut you a new metal key.

Recommended: What’s the Cheapest Way to Rent a Car?

The Takeaway

For an annual fee, roadside assistance programs typically cover a wide range of problems that befall motorists. The most common service calls are lockouts, flat tires, battery jump-starts, and emergency fuel delivery when you’ve run out of gas. Though insurance coverage varies, most plans consider lockouts a basic service. But you should check the fine print on your plan to verify what’s included.

When you’re ready to shop for auto insurance, SoFi can help. Our online auto insurance comparison tool lets you see quotes from a network of top insurance providers within minutes, saving you time and hassle.

SoFi brings you real rates, with no bait and switch.

FAQ

How does roadside assistance open a locked car?

A roadside assistance service provider will likely have several different tools available to pop or pick a car lock, or they may be able to cut a new key for you. If all else fails, your car can be towed to a location where the car can be worked on.

What should you do if your car is locked and the keys are inside?

If you’ve locked in a child or pet, or you feel in danger, call 911 right away. But if you feel safe and you’re looking to get help quickly and with the least amount of risk to you and your vehicle, a call to roadside assistance can be a good choice.

Can 911 help with locked keys in a car?

911 was created to deal with emergencies, and it will be up to the dispatcher to decide how to prioritize your call. If an officer is dispatched, or if one sees you stranded and pulls over to help, you still may have to wait for a locksmith with the proper tools or a tow truck.

Photo credit: iStock/ronstik

Auto Insurance: Must have a valid driver’s license. Not available in all states.
Home and Renters Insurance: Insurance not available in all states.
Experian is a registered trademark of Experian.
SoFi Insurance Agency, LLC. (“”SoFi””) is compensated by Experian for each customer who purchases a policy through the SoFi-Experian partnership.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Jul
28
2024

How Much Money Should You Save Before Moving Out?

By | Budgeting & Goals, events, Financial Independence | Comments Off on How Much Money Should You Save Before Moving Out?

Living on your own can be expensive, especially these days, thanks to inflation and a scarcity of housing. Add to that the fact that when we’re younger, we tend to have lower incomes, and it can be a major financial challenge to afford living on your own.

That said, it is certainly possible to afford moving out of your parents’ place. The key is to start planning and saving well in advance of your intended move. As a general rule, you want to have at least six months’ worth of living expenses saved up before setting off on your own. That may sound like a tall order, but these tips and strategies can help you get there.

Key Points

•   Before moving out, ideally save six months’ worth of living expenses, though some manage with less.

•   Calculate all potential upfront and ongoing costs to ensure affordability.

•   Consider sharing expenses with a roommate to make moving more feasible.

•   Research and compare housing options in different locations to maximize value.

•   Establish an emergency fund to cover unexpected expenses after moving out.

How to Financially Prepare to Live on Your Own

One of the most important first steps in getting ready to move out is determining how much it’s going to cost. Once you come up with a ballpark figure, you can determine a realistic timeline, then start setting aside a portion of every paycheck into a savings account that pays a competitive rate (such as a high-yield savings account) earmarked for your move.

Upfront Costs and Regular Bills

Let’s say a friend clues you in on a great deal on an apartment rental and says to hurry and get an application in. Just a minute, please! Before you can move out, you need to make sure you can truly afford to do so.

Start your research by tallying up all upfront costs and regular bills you’ll need to pay such as rent, auto and renters insurance, utilities, cell phone service, health insurance, transportation, and groceries. After calculating all necessary expenses, see how much room is left in your budget for extras like dining out or traveling.

Also consider the one-time hits your finances will take when you head out on your own: There may be broker’s fees, moving expenses (more on that in a minute), and other charges, as well as the price of buying furniture and other items for your home.

By looking at your budget this way, you can get an idea of whether you can comfortably afford to move out or if you need to wait a little bit longer to make a move work financially. You want there to be some breathing room in your budget so you don’t wind up putting necessities on your credit card and racking up debt.

Earn up to 4.00% APY with a high-yield savings account from SoFi.

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12 Steps to Afford Moving Out

Now that you have an overview of costs and expenses, it’s time to take the next step and drill down on understanding what you can afford, when you’re ready to move out, and how to navigate a move more easily.

These steps can help you get your own place without going broke.

1. Assess How Much Rent You Can Afford

As you plan this big step in adulting, you are likely most focused on how much rent you can pay. You’ll want to come up with a range of how much rent you can take on while still managing your other necessary bills, such as student loans, health insurance, and car payments.

It’s a good idea to tally up all your expenses and subtract that from your monthly after-tax income to see how much room is left in your budget and if the amount you can afford to pay is doable in your area. If you’re feeling as if you can’t quite come up with the necessary rent, you may want to consider how to move to another state or a nearby city that’s more affordable.

2. Consider Getting a Roommate

If it’s too hard to afford rent all on your own, you can think about having a roommate to help share the expenses with. Having a roommate can also make moving out for the first time feel less lonely.

3. Research Homes and Locations

Speaking of rent: Whether you plan to rent or buy when you move out, you’ll want to do some research on different housing opportunities in different areas. That way, you can see where you can get the most bang for your buck while still meeting your personal goals.

For instance, if you really value having a short commute, you might search for a studio instead of a one-bedroom apartment in the neighborhood you are targeting, if one-bedroom units are pricey. Or, if you’re hoping to rent a house, see what kind of prices you find in a neighborhood that’s adjacent to the one you are targeting or choose to go farther afield. You might find better deals due to more housing supply.

Recommended: Tax Breaks for Young People

4. Research the Cost of Movers

If you have a fair amount of things to move, it’s important to budget for the cost of movers. Yes, a friend with a van may be able to help with some smaller items, but things like a queen-size bed typically require movers.

Depending on how much you have to move and how far the move is (25 miles? 250?), your costs could be a few hundred or thousands. Ideally, you’ll want to get a couple of estimates from companies that come and actually eyeball how much you have.

Also, be sure to find out whether moving materials are included as you create your moving checklist. You may well be charged for boxes, wardrobes, tape, and moving blankets. In addition, it’s a good idea to inquire about “drive time” to and from your locations, which you may be billed for.

5. Don’t Make Any Excuses

It’s easy to think, “I can’t afford to move out” or “Rentals are hopelessly expensive” and give up (or at least procrastinate for a good long time). But if there’s a will, there’s usually a way. Finding your motivation and patience can be crucial to taking this step and getting your own place.

It’s common to get complacent when moving forward feels hard. If you do have to remain living with your parents or another family member while you save up to move out, keep your eye on the prize. Set up alerts for new home listings, put the word out that you are hunting for a home of your own, and keep saving and making career progress so you can attain your goal of moving out.

You might chat with friends or friends of friends to get their best advice on making your independent living dreams come true. They may have valuable hacks for you, too.

6. Have an Emergency Fund Saved Up

One way to lessen the financial stress of moving out is to have an emergency fund ready and waiting. That way, when you do move out on your own and hit an unexpected (and major) expense, you will have a financial cushion available to help you out.

How much should you have in an emergency fund? Experts advise having three to six months’ worth of basic living expenses stashed away (a high-yield savings account can work well). Figure out what that amount would be with the housing costs you expect to pay, and begin saving. Even $25 or $100 a month is a good start to get that layer of protection going.

7. Track Your Spending

When you are considering moving out for the first time, it’s wise to track your spending for a month or two. This will give you an idea of how much you tend to pay out each month, which can help you get a better idea of how much rent you can afford. For instance, how much do you typically spend on gas? On your WiFi provider? On eating out? As you look at these costs, you may be better prepared to know your budget once you are also paying housing costs.

Looking at your outflow of cash can also help you cut back on nonessential spending. For instance, you might realize you are spending over $100 a month on those iced coffees to go.

8. Budget for Home Needs

Figuring out how to move out with low income can be tricky. One hidden expense that is easy to forget about when budgeting for a move is home needs. Cleaning supplies, furniture, and appliances are expenses mom or dad may have taken care of in the past. Soon, they will be your responsibility. Consider how much that will cost and budget for it.

Also, if you are planning to buy a home instead of rent, budget for property taxes, home maintenance, and repairs.

9. Look for Cheaper Options on Furniture

When you are first starting out, you don’t need to splurge on expensive furniture. Thrift stores, garage sales, and inexpensive retailers can all get the job done. Freecycle and other similar sites (or Facebook and Nextdoor groups) can yield free or low-cost furnishings, too.

Over time, it’s likely to become easier to swap those inexpensive finds out for higher-quality pieces of furniture.

10. Manage Your Finances

To make moving out possible financially, it’s a good idea to keep a close eye on the money coming in and out each month. You’ll want to take some time to get all finances in order and to create a budget for this new chapter. Learning to manage money is a big step towards independence. It will have you that much more prepared for on-your-own living.

Your bank may well have an app that can help you track your incoming funds and your spending, which can help with this endeavor.

11. Set a Moving Timeline

Once it’s clear that a move is affordable, create a final timeline for finding a place to rent or buy and then moving in. Block out weekends for home hunting, and note how long before your move you want to get quotes from moving companies.

If you still need to save a bit more money, you can extend this timeline to include saving for a few months.

12. Be Realistic

It can take time to build the life you dream of, so don’t sweat it if your first home isn’t all that glamorous. Part of the fun of life is figuring things out and evolving over time. Many people have had first apartments that they still fondly look back on, despite how tiny, dark, or inconveniently located they may have been.

The best things in life often take time to fall into place, so be patient as you pursue your financial and lifestyle goals.

Prioritizing Financial Independence Over Savings

Many young people feel stuck at their parents’ because the finances of this situation make it possible to save on rent. They worry about moving out and not being able to save as much as they used to.

While there’s some truth to that point of view, understand that, yes, money is likely to be tight at first, but that is part of this rite of passage. Granted, you may not be able to save as you were before, but you can likely sock away a bit of money in savings (through your employer and/or into an emergency fund, perhaps) and begin to build your credit history, too.

It’s a big leap, but remember that your income will probably rise over time and help you save. Plus, living away from your parents can help you build your budgeting skills and financial savvy.

Banking With SoFi

Saving up for a major expense like a move? SoFi can help. When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards. Qualifying accounts can even access their paycheck up to two days early.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

How much money should you have saved before moving out?

How much money you’ll need to move out varies from person to person. One rule of thumb is to save up at least six months’ worth of living expenses before moving out of a parent’s or family member’s home.

How do you move out when you can’t afford it?

It’s important for your financial health to not move out until you can afford to do so. To get to that point as quickly as possible, consider saving some of every paycheck and putting it in a savings account earmarked for your move. You might also want to look into sharing expenses with a roommate or perhaps taking on a temporary side hustle to earn extra income.

How do I know if I’m ready to move out?

You can get an idea of whether or not you’re ready to leave your parents’ place by calculating how much it will cost to live on your own. Sometimes, it’s just a matter of having a sufficient amount of income and savings. If you can afford to pay for rent and other necessities, plus have some fun (such as the occasional movie or dinner out), and you’ve built up some emergency savings, then you may be ready.

Photo credit: iStock/Hache

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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Jul
03
2024

Budgeting Tips for Life After Divorce

By | Budgeting & Goals, events, Financial Independence | Comments Off on Budgeting Tips for Life After Divorce

You may be getting divorced, but you’re not alone. According to the U.S. Census Bureau, 34% of women and 33% of men in the United States are right there with you, having ended their unions.

Certainly, though, this life event can cause emotional turmoil, and it may trigger worries about money too. Take heart: The end of a marriage does not have to mean an end to financial security. If you keep calm and make a careful post-divorce budget, you are more likely to stay fiscally fit.

Why Is a Post-divorce Budget Critical?

A realistic budget after divorce is a must. It can often cost a lot more to run two households than one. Still, doing what’s right for your personal life path and well-being comes first; there’s no point staying unhappily wed simply to save money. It can be possible to find steady footing during this transition with the right basic living expenses budget.

Truth is, after the sometimes hefty expense of a divorce lawyer (if you hired one), you will possibly be solely responsible for housing, utilities, groceries, car maintenance, and more.

There are various ways to budget for this, including the 50/30/20 rule and the envelope system, among others. You’ll also likely encounter a variety of tools, including spreadsheets and apps. Take the time to review your options and find an approach that feels right for you.

Recommended: Am I Responsible for My Spouse’s Debt?

Lifestyle Pre-divorce and Post-divorce Will Be Different

Get ready for changes in your lifestyle and your cash management. Transitioning from couplehood to single status can take time, patience, and being kind to yourself.

You will likely need to set up your own bank account, for example, if you previously had a joint account with your ex. And you’ll need to put your place of residence, you car, and utility bills, among other things, in your name.

You may be responsible for more household chores now, as you may not be able to afford, say, the cleaning person or landscaper you used to employ. Trimming the leisure budget (dinners out, vacations, entertainment, fitness classes) might be necessary, but all is not lost. Prioritize what is most important to your self-care now. This can be a bump in the road, not the end of the line.

Newly Single Life Can Be Taxing Emotionally and Financially

Divorce can affect your spirit as well as your finances. If you’re struggling and don’t have a therapist, consider finding one and/or joining a support group in your community. We can’t always “adult” our way through rough times.

Get up to $300 when you bank with SoFi.

No account or overdraft fees. No minimum balance.

Up to 4.00% APY on savings balances.

Up to 2-day-early paycheck.

Up to $2M of additional
FDIC insurance.


Finances for Children May Be Difficult

Children are a hot-button topic for almost all parents, both married and divorced. Meeting their emotional and financial needs can lead to a tug-of-war, especially if you and your ex don’t communicate calmly and effectively.

As your divorce unfolds, pay close attention to what counts as child support. For instance, you may want to continue your child’s soccer league, guitar lessons, or art classes, but these activities may or may not be covered. Also, if you have a teen who is begging for a used car, that large expenditure may not be covered by child support either.

Knowing just what counts as a child support expense, along with careful record keeping, will be important as you develop with your divorce budget. After all, knowledge is power. It will help you negotiate and budget better as a single parent, as well as keep the peace as you co-parent.

Recognize You Can No Longer Rely on Two Incomes

It can be a huge learning curve: Relying on a single salary instead of two. This post-divorce situation can be especially complicated if your ex had the employee benefits, including family health and dental insurance, 401(k) contributions, and a flexible spending account (FSA), where payroll deductions cover everything from child care to eyeglasses.

Now is the time to investigate what options you have to gain self-sufficiency and stay on budget. For example, if you work, does your employer offer an affordable health insurance plan? If you are self-employed, what networking groups could advise you on good options? Do you perhaps qualify for a lower-cost health insurance plan on the marketplace? Explore ways to save money, too. For instance, perhaps a high-yield savings account might be right for you. Even if you contribute just $20 a week, the money can add up and earn interest over time. Invest some time in seeing what’s available that suits your needs and budget.

Potential Questions to Ask Yourself

As you move through your divorce process and onto your newly single life, ask and answer the big questions. These can help you both trouble-shoot and thrive.

•   How much is my income going to change? First, look at past bank statements. See how much your spouse and you have each contributed to the family income. In many cases, of course, alimony will come into play, but you need a realistic income-based expectation for that, too.

•   What do I need to let go of? This may take soul-searching. As you go from two incomes to one income, it’s likely that something’s got to give in terms of expenditures. Think creatively about where and how to economize. You might decide to plan and cook ahead for the week to minimize the temptation and expense of eating out. Or perhaps you decide to split an apartment with a friend for a while to save on rent while you get your bearings. It’s your call.

•   How should I supplement my income? If you need to get cash flowing your way, contemplate what’s in your toolbox of strengths and skills. One of the key benefits of a side hustle is that it can boost your income and fit your schedule. Maybe you’re a super-organized person who offers decluttering skills, a tech-savvy type who can build websites for others, or an animal lover who pet-sits or walks dogs. Other ideas: Fill free hours as an Instacart shopper, Amazon delivery person, or Uber driver.

•   How will we fairly work out financial support for the kids? Are the children dividing their time 50/50 between you and your ex? What will your child support agreement entail? What additional expenses may come up in the future (tutoring, college prep classes)? Think and work it through, possibly with professional guidance.

Post-Divorce Budgeting Tips

Once you have mulled over the issues relating to post-divorce life, keep these strategies in mind to help you optimize your finances.

Focusing On Current Income

Base your budget on your income now, after taxes. Do not base it on the projected income you hope to have. Don’t get caught up thinking about your former two-person income. Being pragmatic right now will likely pay off and help you stay out of debt.

Focusing On Most Important Monthly Expenses

For now, prioritize what it will take to get through daily life. Calculate costs of a roof over your head, a way to get to work, food, child care, healthcare, and other essentials. Take care of people first, starting with yourself; then deal with material things later.

Letting Go of Unnecessary Items

Go ahead and slash some items out of your budget. There are some easy ways to save money. Perhaps you can jettison a couple of streaming services, cut back on clothes shopping, and mow your own lawn instead of hiring someone else to do it. That feeling of opening up some room in your budget can be priceless.

Giving Yourself Safe and Budget-Friendly Fun

Find the right mood lifters. Avoid expensive, impulsive purchases when you are feeling emotionally hurt and raw. They can wreak havoc with your finances.

Instead, treat yourself to free or low-cost adventures and experiences. Fresh air can be healing and motivating; local parks and wildlife sanctuaries may offer free guided walks and birdwatching outings.

Considering Working With a Financial Advisor

As you sort out your finances as you approach a divorce, you may want to enlist a professional versed in the issues that can crop up. Child support, shared credit-card debt, and division of jointly owned real estate can require this kind of guidance. A certified divorce financial analyst (CDFA) is trained to assist with this and help you get the fairest possible deal. Explore the possibility and find out the CDFA fees to see if it’s a good option for you.

Post-divorce, you might also seek out an advisor who can help you set up a financial plan so that your spending and saving habits suit your new situation.

The Takeaway

Transitioning from pre-divorce to post-divorce life can stir up fears and insecurities, but you can take concrete steps to manage the unknown. Face facts about income, set a realistic budget, and find the right bank account. Prioritize your needs, and be willing to put unnecessary expenses on hold for now. Like so many others, you will find your footing and peace of mind, thanks to patience, flexibility, and wise budgeting.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

How do you budget after a divorce?

To budget for post-divorce life, assess and prioritize non-negotiable needs (such as housing, food, utilities, and child care), and phase out or reduce unnecessary extras. Pay attention to the details of your divorce agreement, as alimony and/or child support may impact your finances significantly.

How long does it take to financially recover from divorce?

The timeline for recovering financially from divorce varies tremendously, depending on the particulars of a person’s income, divorce agreement, and other factors. It may take around five years to fully regain your sense of control over your money, though that could happen much sooner (or take even longer) for some.

Will I be poor after divorce?

The U.S. Census Bureau reports that after a divorce, household income for women can drop considerably. This is all the more reason to budget carefully after divorce and seek professional advice. These steps could help you avoid costly mistakes that impact your financial wellness.

Photo credit: iStock/PeopleImages

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2024 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

4.00% APY
SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

This article is not intended to be legal advice. Please consult an attorney for advice.

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Apr
23
2024
Buying a Multifamily Property With No Money Down

Buying a Multifamily Property With No Money Down: What You Should Know First

By | events, Growing Wealth, Home Ownership | Comments Off on Buying a Multifamily Property With No Money Down: What You Should Know First

Real estate investments make money through appreciation and rental income. Real estate can diversify a portfolio and act as a hedge against inflation, since landlords can pass rising costs to tenants. But the down payment on multifamily investment properties? At least 20%, or 25% to get a better rate.

It’s true that eligible borrowers may use a 0% down U.S. Department of Veterans Affairs (VA) loan for a property with up to four units as long as they live there. But those loans serve a relative few and are considered residential financing. Properties with more than four units are considered commercial.

So how can a cash-poor but curiosity-rich person tap the potential of multifamily properties? By not footing the entire bill themselves.

Key Points

•   Real estate investments offer potential income through appreciation and rental income, providing a hedge against inflation.

•   Eligible borrowers can use a 0% down VA loan for properties with up to four units.

•   Various financing strategies enable purchasing multifamily properties with little to no personal money upfront.

•   Options like finding a co-borrower, securing hard money loans, or obtaining seller financing can facilitate the acquisition.

•   Indirect investment methods include crowdfunding and real estate investment trusts (REITs), allowing participation without direct landlord responsibilities.

Can You Buy a Multifamily Property With No Money?

When you buy real estate, you typically have two options: Buy with cash or finance your purchase with a mortgage loan.

There are various types of mortgages. If you take out a home loan, you’ll likely need to pay a portion of the purchase price in cash in the form of a down payment. The minimum down payment you make will depend on the type of mortgage you choose — the average down payment on a house is well under 20% — and it will help determine what terms and interest rates you’ll be offered by lenders.

This money needs to come from somewhere, but it doesn’t necessarily need to come from your own savings account. When investors buy multifamily properties with “no money down,” it just means they are using little to no personal money to cover the upfront costs.

If you don’t have much cash of your own, there are several ways that you can fund the purchase of a multifamily investment property.


💡 Quick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($806,500 in most places, or $1,209,750 in many high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.

6 Ways to Pay for a Multifamily Property

Find a Co-Borrower

If you don’t have the money to front the costs of a property yourself, you may be able to partner with a family member, friend, or business partner. They may have the money to cover the down payment, and you might pull your weight by researching properties or managing them.

When you co-borrow with someone, you’ll each be responsible for the monthly mortgage payments. You’ll also share profits in the form of rents or capital gains if you sell the property.

Give an Equity Share

You may give an equity investor a share in the property to cover the down payment. Say a multifamily property costs $750,000, and you need a 20% down payment. An equity investor could give you $150,000 in exchange for 20% of the monthly rental income and 20% of the profit when the property is sold.

Borrow From a Hard Money Lender

Hard money loans are offered by private lenders or investors, not banks. The mortgage underwriting process tends to be less strict than that of traditional mortgages. Depending on the property you want to buy, no down payment may be required.

These loans (also called bridge loans) have high interest rates and short terms — one to three years is typical — with interest-only payments the norm. For this reason, they may be used by investors who may be looking to flip the property in short order, allowing them to make a profit and pay off the loan quickly.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

House Hack

House hacking refers to leveraging property you already own to generate income. For example, you might rent out an in-law suite or list your property on Airbnb.

Another option: You could rent out your primary residence and move into one of the units in a multifamily property you buy. This way, you’d probably generate more income than if you had rented out the unit to a tenant.

Finally, you could hop on the ADU bandwagon if you own a single-family home. Accessory dwelling units can take the form of a converted garage, an attached or detached unit, or an interior conversion. The rental income can be sizable. To fund a new ADU, homeowners may tap home equity, look into cash-out refinancing, or even use a personal loan.

Seek Seller Financing

If you don’t have the cash for a down payment on a property, you may be able to forgo financing from a lending institution and get help instead from the seller.

With owner financing, there are no minimum down payment requirements. Several types of seller financing arrangements exist:

•   All-inclusive mortgage: The seller extends credit for the entire purchase price of the home, less any down payment.

•   Junior mortgage: The buyer finances a portion of the sales price through a lending institution, while the seller finances the difference.

•   Land contracts: The buyer and seller share ownership until the buyer makes the final payment on the property and receives the deed.

•   Lease purchase: The buyer leases the property from the seller for a set period of time, after which the owner agrees to sell the property at previously agreed-upon terms. Lease payments may count toward the purchase price.

•   Assumable mortgage: A buyer may be able to take over a seller’s mortgage if the lender approves and the buyer qualifies. FHA, VA, and USDA loans are assumable mortgages.

Invest Indirectly

Not everyone wants to become a landlord in order to add real estate to their portfolio. Luckily, they can invest indirectly, including through crowdfunding sites and real estate investment trusts (REITs).

The Jumpstart Our Business Startups Act of 2013 allows real estate investors to pool their money through online real estate crowdfunding platforms to buy multifamily and other types of properties. The platforms give average investors access to real estate options that were once only available to the very wealthy.

REITs are companies that own various types of real estate, including apartment buildings. Investors can buy shares on the open market, and the company passes along the profits generated by rent. To qualify as a REIT, the company must pass along at least 90% of its taxable income to shareholders each year.

As investment opportunities go, REITs can be a good choice for passive-income investors.


💡 Quick Tip: To see a house in person, particularly in a tight or expensive market, you may need to show the real estate agent proof that you’re preapproved for a mortgage. SoFi’s online application makes the process simple.

The Takeaway

Buying a multifamily property with no money down is possible if you take the roads less traveled, including leveraging other people’s money. And if you have the means to make a down payment on a property, your first step is to research possible home mortgage loans.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.


SoFi Mortgages: simple, smart, and so affordable.

FAQ

Can I buy a multifamily home with an FHA loan?

It is possible to buy a property with up to four units with a standard mortgage backed by the Federal Housing Administration (FHA) if the buyer plans to live in one of the units for at least a year. The FHA considers homes with up to four units single-family housing. The down payment could be as low as 3.5%. There are loan limits.

A rarer product, an FHA multifamily loan, may be used to buy a property with five or more units. The down payment is higher. You’ll pay mortgage insurance premiums upfront and annually for any FHA loan.

Is a multifamily property considered a commercial property?

Properties with five or more units are generally considered commercial real estate. Commercial real estate loans usually have shorter terms, and higher interest rates and down payment requirements than residential loans. They almost always include a prepayment penalty.

Photo credit: iStock/jsmith

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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.

*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
†Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency.

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