Newbie needs your input on how to proceed with property #2

I need some help figuring out the best strategy financially from your experience on how I should proceede with my second property.

Ok here’s the situation…

I just purchased my first investment property 2 months ago after saving for 2 years out of college.
It’s a 3 bedroom Apt. in Boston, purchased at 240K /w 20% down (it needed alot of work so I got cheap). -I put about 5K of inprovements into it and did a lot of the work myself and it looks awesome now. It rents for 2400/month but I’m currently living there with roomates so I’m at break even, living for free and saving up more cash.

My ideal situation would be to purchase another 3 bed apartment to fix up again or a 3 family right outside the city where I can keep two floors rented out while I improve the third. I’d like to do this in April, May, or June of 2011 for somewhere between 280K-320K. By then my financial situation will look like this: 49K of equity in current Apt, 20K in cash savings and another 20K in my 401K.

Is this reasonable with my current situation. Also if it helps I will be moving out of the apartment I currently live in and moving to the new place so that I can fix it up.

So I have a few questions:
1 Will my finances allow me to get something for 280K-320K and whats the best way to purchase the property given my savings mentioned above?
2. Is my strategy decent, or should I come up with something different?
3. Will living there help with financing?

Any help would be greatly appreciated. Also I’m currently 25, work full time and am not married and have no kids (that I know of :rolleyes)

I wouldn’t pull equity out if you don’t have to because that would eat up some of your cash flow and you’d probably have to add another $100/mo for pmi. And thats if a lender would even do it. If it were me, I would go for a multi unit like you said (assuming you qualify high enough). But I would go with an FHA loan. 3.5% downpayment and good interest rates. It could take a little longer to find someone willing to accept an FHA offer if you have alot of competition and you’d have to live in it for a year but it’s an awesome loan. I just picked up a triplex here in San Diego for 230k(short sale fixer) with 3.5% down and 4.25% interest rate. And I got the seller to pay my closing costs. My down payment was $8050. Can’t beat that.

You’ll need to find a lender who can do FHA loans and you should get an agent with that experience too as there are some rules. They also offer FHA 203k rehab financing. Learn as much as you can. You’re on a great path.