Tips on a live-in multi-family home to start

Starting Out
12yFollow

Tips on a live-in multi-family home to start

Breandan Garland
Investor · Milford, NH · Member since 2013 · 9 posts · 3 votes

Hello all!

I want to introduce myself to the members here at BiggerPockets. My name is Breandan Garland and I currently live in southern New Hampshire. I have been a member at BiggerPockets for a few months now, but I have not yet gotten involved in any dialogue on the site. I have been quietly reading and listening to the podcasts for months now, but I would like to start investing as soon as possible. Unfortunately, I do not have much start-up capital I can throw at a property. I do have a full-time job currently that I can use as some sort of source of capital, but I feel that sourcing a mortgage or a conventional loan through a bank would not be successful with my income and credit.

After much thought, I feel that I want to start with a multi-family (2-4 unit) property that I can live in and manage. I am not scared of having to do rehab to the property, but I am concerned with figuring out how I will fund any rehab costs. Are there any success stories out there from people who were in similar situations as I am starting out? I have heard a few, but I would like to get into conversation with some folks who can offer me real-life examples.

Thanks in advance! I look forward to getting into a conversation with some folks and opportunities to ask follow-up questions. I am open to suggestions!

1Reply
58 views

Most Popular Reply

Brie SchmidtBusiness Member
Moderator
Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
12y

FHA has weird rules, like no chipping pain or cracked windows. But major rehab properties do qualify for the renovation mortgage which allow you to finance part of the costs of a renovation. if you look on their website it will show available properties and ones that qualify for the rehab loans

http://www.homepath.com/

As far as mainstream bank lending (no hard money or portfolio - the types a normal loan officer would handle) here are your options:

FHA Owner occupied 1 - 4 units - 3.5% down must pay PMI (this link explains PMI http://www.bankrate.com/finance/mortgages/the-basics-of-private-mortgage-insurance-pmi.aspx )

Conventional Owner occupied 1 - 4 units - 20% down with no PMI

Conventional Non Owner occupied (investment ) 1 - 4 units - 25% down with no PMI

If you can find owner financing it might be easier to qualify - but the owner must own the property outright (no loans because they are non transferable)

Podcast Guest on Show #132
Second City Real Estate4.821 Reviews
WebsiteView Page
1Reply
See this reply in the discussion

18 Replies

Jump to latestLatest
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    I started out living in a multi - I cannot offer rehab advice as we bought from a flipper but I think it is the best way to start and wish you the best of luck!

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    0Reply
  • Jean BolgerPro Member
    Aurora, CO · Member since 2012 · 2k+ posts · 1k+ votes
    12y

    As Brianna pointed out, you may find a property that doesn't require much in the way of rehab. My first property was an owner occupied duplex, and when I moved in I just had the floors refinished and then painted it myself, but I could have easily lived there without doing either of those things. The other unit was already occupied, so there was no need to upgrade anything there until those tenants moved out a few years later.

    Or, there are also programs like Homepath. They offer renovation funding on some of their properties that is rolled into the mortgage

    0Reply
  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    @Breandan Garland

    Welcome to BP. There is some good cycling in your area. I spent a couple years working a project in Portsmouth and, in the spring & summer, would ride my road bike over to Hillsborough {Home of Paul While Cycles}, Greenfield and beyond {one Saturday I road clear to the Vt border & back}.

    Starting out with a 3-4 unit in which you live is a very frugal and smart way to get started, it usually means lower property taxes and, in the U.S.A., lower mortgage rates and down payment.

    Would you be looking to remain in Greenfield, or would Keene, Manchester or Concord be options for you ... prices would be a little higher, unless you remained on the outskirts, but your tenant pool would be larger.

    0Reply
  • Breandan Garland
    OP
    Investor · Milford, NH · Member since 2013 · 9 posts · 3 votes
    12y

    @Jean Bolger

    I will have to look into Homepath I have never heard of it before, thanks for the input!

    @Roy N.

    I do not cycle but I used to run competitively in college - I have to say all of the hills around here really helped with training!

    As for staying in Greenfield, I have no plans to stay in Greenfield. I am looking for opportunities in the cities/towns you mentioned. I actually considered moving further south after graduation but I recently got a job in Londonderry so I feel I may be sticking around for a few years at least.

    What do you guys think about owner financing? Is this worth looking into to get in somewhere without a bank? Or something to avoid?

    0Reply
  • Paul Timmins
    Specialist · Rockland, MA · Member since 2010 · 7k+ posts · 2k+ votes
    12y

    @Breandan Garland

    Welcome. Consider using student housing see below.

    Check out the Start Here page http://www.biggerpockets.com/starthere

    Check out BiggerPockets Ultimate Beginner's Guide - A fantastic free book that walks through many of the key topics of real estate investing.

    Check out the free BiggerPockets Podcast - A weekly podcast with interviews and a ton of great advice. And you get the benefit of having 50 past ones to catch up on.

    Locate and attend 3 different local REIA club meetings great place to meet people gather resources and info.

    Two Great reads, I bought both J. Scott The Book on Flipping Houses,The Book on Estimating ReHab Costshttp://www.biggerpockets.com/flippingbook

    Consider checking out HUD homes for small multi's owner occupied gets first crack.

    You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it.

    Good Luck

    Paul

    0Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    In my opinion the biggest benefit of buying a multi and living in one is low down payments. You could do FHA with 3.5% down. We had 12k bought a 300k property and lived for free. Saved and saved and bought more. In 18montjs the property was worth 350k so we refinanced out to conventional and dropped PMI (the downfall of FHA)

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    0Reply
  • Lou Veiga
    Rental Property Investor · Hollis, NH · Member since 2013 · 78 posts · 7 votes
    12y

    Hi @Breandan Garland

    Welcome to the forum. Nice to see some small town locals joining in.

    I work with someone that also lives in Greenfield. I love riding my motorcycle through that area. There are some great back roads towards that side of the state.

    0Reply
  • James Mudd
    Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes
    12y
    Brianna S. ...how much does PMI usually cost..?
    0Reply
  • Breandan Garland
    OP
    Investor · Milford, NH · Member since 2013 · 9 posts · 3 votes
    12y

    @Paul Timmins

    Thanks for the suggestions. I haven't really thought about student housing opportunities, definitely worth looking into! Especially around the Keene area if I decide to go that route.

    @Lou Veiga

    Beautiful roads but they can be frustrating in the winter months! Haha

    @Brie Schmidt

    Would you suggest going a different route then since I do not have $12k to throw down on a property yet? Or maybe looking less expensive? I just don't want to unexpectedly find myself in a low income area with high crime. I could do some research first, though, of course.

    0Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    @James Mudd - our loan was for $289,500 on a $300k purchase - our PMI was $275 a month and about $4k in upfront fees

    @Breandan Garland - The #1 rule in RE is location location location. We bought in a transitional neighborhood that had started to be revitalized before the crash - so we knew once the market picked up it would be one of the first to get developed. At the same time we knew it could be a few years so we made sure it was still a safe place and somewhere we could live comfortably

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    0Reply
  • Breandan Garland
    OP
    Investor · Milford, NH · Member since 2013 · 9 posts · 3 votes
    12y

    @Brie Schmidt

    Thanks for the tips. Back to the FHA loan topic. I have read that FHA will not fund properties that need repairs. Is this a strict rule? Or is it more aimed towards properties that need more major repairs - having structural issues or something.

    Can anyone shed any light on the owner financing topic? Good/bad idea? Is it any easier to acquire than a traditional bank loan? I just don't see myself qualifying for a mortgage quite yet. I am open to suggestions, and after further consideration I may be leaning towards live-in property management to start due to my current financial situation.

    0Reply
  • Brie SchmidtBusiness Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    12y

    FHA has weird rules, like no chipping pain or cracked windows. But major rehab properties do qualify for the renovation mortgage which allow you to finance part of the costs of a renovation. if you look on their website it will show available properties and ones that qualify for the rehab loans

    http://www.homepath.com/

    As far as mainstream bank lending (no hard money or portfolio - the types a normal loan officer would handle) here are your options:

    FHA Owner occupied 1 - 4 units - 3.5% down must pay PMI (this link explains PMI http://www.bankrate.com/finance/mortgages/the-basics-of-private-mortgage-insurance-pmi.aspx )

    Conventional Owner occupied 1 - 4 units - 20% down with no PMI

    Conventional Non Owner occupied (investment ) 1 - 4 units - 25% down with no PMI

    If you can find owner financing it might be easier to qualify - but the owner must own the property outright (no loans because they are non transferable)

    Podcast Guest on Show #132
    Second City Real Estate4.821 Reviews
    WebsiteView Page
    1Reply
  • James Mudd
    Real Estate Agent · Realtor - Dallas, TX · Member since 2013 · 342 posts · 55 votes
    12y

    @Brie Schmidt

    ...thank you for the info Brianna !!!

    0Reply
  • Breandan Garland
    OP
    Investor · Milford, NH · Member since 2013 · 9 posts · 3 votes
    12y

    @Brie Schmidt

    Thanks for that info, I really appreciate it.

    It's looking like it would be much easier for me if I were able to wait a while and have some cash to put down as well as some cash on hand for any repairs/upgrades needed. Hopefully my current day job will be able to provide this moving forward (this was my plan until I am able to have enough income from properties). I just graduated college, which is why I don't have much savings. Once I get a few months under my belt at this job I'm sure I will be in a much better position.

    0Reply
  • Brian Gibbons
    Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
    12y
    Originally posted by @Brie Schmidt:

    If you can find owner financing it might be easier to qualify - but the owner must own the property outright (no loans because they are non transferable)

    A wrap around or sub2 or installment sale - cfd can be done with the owner's loan in place. FYI.

    0Reply
  • Breandan Garland
    OP
    Investor · Milford, NH · Member since 2013 · 9 posts · 3 votes
    8y
    jeerr reeeerrrrr r rrt
    0Reply
  • Jordan MoorheadBusiness Member
    Real Estate Agent · Austin, TX · Member since 2015 · 5k+ posts · 3k+ votes
    8y
    You can use an FHA 203k if you find something that needs a bit of rehab. I just used the FHA loan and put $15k into mine when I bought it. I’ve been living for free ever since!
    [email protected]512-888-9122
    The Moorhead Team5140 Reviews
    WebsiteView Page
    0Reply
  • Josh Dillingham
    Rental Property Investor · Brattleboro, VT · Member since 2015 · 204 posts · 174 votes
    8y
    @Breandan Garland just read through this post then realized it was brought back from the dead after 4 years. would be interested to hear what you decided to so and where you are with your investing 4 years later! I live in Brattleboro, Vermont not too far from you, and took a similar path to what you were discussing. bought a 3-unit property 2 years ago with a 3.5% down FHA loan. it's been great for learning how to be a landlord and learning how to do home repairs and renovations at my own pace.
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free