I’m ready to invest in real estate. I’ve been excited about starting my investing career for a long time now. I plan to buy and hold residential mutilfamily properties. I currently live in an apartment and I guess my question is, should I start by investing in a duplex/triplex/fourplex, living in one unit and renting the others? Or should I focus on purchasing my personal residence before I start investing in other properties?
I prefer not to wait any longer than I already have, as the housing market in Texas is predicted to start recovering.
Hello and welcome :beer do what you have to do to jump in and get the getting while its good you dont want to be the person ten years down the line like man i shouldve got in when prices were alittle lower. I think its a greater idea to get the duplex etc and rent out the other side or sides for income then starting with your own personal residence cause if you do that then thats not actually investing… having a duplex means you could have another person paying your bills while you save for your personal home then once you do that you’ll have 2 tenants paying all the bill and etc you catch my drift…
Buying a 4plex as your residence is a great way to start! Especially if you can find a HUD/Homepath 4plex! Here’s the deal though, don’t ‘let other people pay your bills’. Pay your bills! It’s a modified pay yourself philosophy! If you are already renting, you might as well rent from yourself and increase your captial by continuing to pay rent. Add on to it, 3% down and a great rate! Why would you buy a personal residence (assuming no familial issues). We purchased our first with my partners guarenteeing the loan, the second under contract is going to be a HML, and our third this year will be exactly as outlined here, owner occupied with a FHA loan. Conserving intial capital to get closer to the next deal.
I agree with Chuck. If you start with something less than 5 units like you said, you could possibly get into that property with very little down. The rules change for 5 units and up. If you look at a small multi-unit proeprty, make sure you know what utilities you’ll be paying as the owner. Some buildings are not separately metered for utilities while others may have separate electric meters, but only one water meter.
Even though I would be occupying one unit, would the bank still use the rent from all four units to calculate the scheduled income?
Why does the bank care about scheduled rent? This is a FHA loan/Primary Residence. Rental numbers should have no bearing on the purchase. Of course, if your income doesnt support the mortgage, and they are asking for rental numbers, than I would argue you probably arent buying at a low enough discount.
Also, Is it a good idea to use all four units to calculate cash flow? Or should i not count the unit I will occupy.
Are you paying rent? If you are then I would use that unit to calculate cashflow. If you are just occupying a place that could be making you money, and you arent making money than it’s a vacant unit that is decreasing the potential $$.
Think about your exit strategy here, when you purchase a 4plex, what are the things you are going to look at during your due diligence? Those are going to be the same thing another investor is going to be looking at when you sell your property. If you are not recording the proper numbers, well then the investor is going to throw out your proforma numbers, and use the real numbers!
The truth is that no one knows what is going to happen to the economy, the currencies, the markets, the regulations, etc. etc. However, those who spend the most time learning about these different topics, and then implementing proven strategies, are going to be the people who are most likely to succeed. If you continue to sit on the sidelines and watch as the markets evolve, then you will continue to wish you had started. As there is no good reason to put off investing for another day.
Start and do not plan to sell. In other words, buy a place you can afford long term. Then there is little to no reason to worry about market timing.
Real estate really does not go up in value. The value of the currency goes down over time. If we are going to have inflation now and into the future we will have houses that cost more dollars in the future.
If you buy a 4-plex or even buy a house, renting the other space makes sense. I bought a SFR and rented 2 bedroom. I was used to roommates. Buying a plex where each person has their own space can be even better.
Get out of thinking about living cheaply. Focus on earning more and saving. There is a limit to how cheap you can live. There is no limit to how much you can earn and saving. Yes, a bit of a mind game. That is the point of this. It is mostly in your head what you can or can not accomplish if you focus.