Purchasing second real estate for cash flow investment

Rental Property Investor · Detroit, MI · Member since 2022 · 4 posts · 3 votes

My wife and I currently owns a single family home that can sell for 80% above the price we bought it for. It is getting old and I feel renting it would cost to much money to repair. I wanted to buy a quadruplex and rent out each unit. I’m not sure where to start as far as if I should sell this house, invest in the multi family home and live there or should I just invest in one, rent out all rooms and move in to a new house? I am new at investing in real estate and currently do not have any rental properties. I only own a single family house.

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Prestin Sokoloski

Duluth, MN · Member since 2020 · 31 posts · 12 votes

@Kevin Lee, I would ask if the 80% equity in your own home would cover the cost to acquire the Quadruplex? If that is the case and you are happy in your home you may consider refinancing your home. This would give you cash to buy the 4 unit. Then if the numbers work with your higher monthly payment on the house as well as the 4 unit mortgage, problem solved. On the flip side if you decide to sell and move instead you'll have to see if you can swing a down payment for both your new home and the rental property.

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Prestin Sokoloski
Duluth, MN · Member since 2020 · 31 posts · 12 votes
4y
@Kevin Lee, I would ask if the 80% equity in your own home would cover the cost to acquire the Quadruplex? If that is the case and you are happy in your home you may consider refinancing your home. This would give you cash to buy the 4 unit. Then if the numbers work with your higher monthly payment on the house as well as the 4 unit mortgage, problem solved. On the flip side if you decide to sell and move instead you'll have to see if you can swing a down payment for both your new home and the rental property.
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Nick Harris
Real Estate Agent · Detroit, MI · Member since 2020 · 7 posts · 6 votes
4y
Quote from @Kevin Lee:

My wife and I currently owns a single family home that can sell for 80% above the price we bought it for. It is getting old and I feel renting it would cost to much money to repair. I wanted to buy a quadruplex and rent out each unit. I’m not sure where to start as far as if I should sell this house, invest in the multi family home and live there or should I just invest in one, rent out all rooms and move in to a new house? I am new at investing in real estate and currently do not have any rental properties. I only own a single family house.
You have multiple options in this situations and all of them have pros and cons. The two primary options would be
1. refinance your current property, put a tenant in it and purchase your new primary single family residence
2. refinance your current property, put a tenant in it and purchase a 2-4 unit property you can househack
3. sell the current property, purchase a new SF primary residence and possibly another rental property

Feel free to reach out to me as I am an investor agent specialist in the Metro Detroit market
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
4y
What makes you think your current house will need a bunch of repairs to rent out? We manage 1100+ year old houses that we rent out. If you are really concerned, then hire a professional inspector to give you a report.
If you decide to sell, and have no investment experience, there are many benefits to buying a 2-4 unit. You can live in one unit and rent out the other(s), leading to you learning a lot about property management. After 12+ months, you could then buy another 2-4 unit and repeat the process.
At some point during your growth, you could hire a property management company and your PM knowledge gained should help you mange the PMC and avoid being taken advantage of.
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