Looking for my first property

7 Replies

Im almost done with college and looking for my first property. I have been fortunate in the fact I have no student debt and have saved enough for a down payment. My parents have a few rentals and I have seen their success with real estate. I am looking to buy a duplex and live in one half rent the other. My plan is to live in the duplex until I can acquire my next property then keep it and repeat the process. I have a job lined up but would like to work on building up a few properties. I have helped my dad with some remodeling work and I'm going to do any maintenance I can do myself.

I am trying to learn/read what I can because I have a few months before being done with school. If anyone has advice on what type of mortgage 15yr/30yr? I believe taking a 30 year is way to go with low interest rates and also what kind of downpayment would you suggest? Also how long do people usually plan to live in the duplex?

Minimize your down payment... cash makes real estate easy... it's possible to invest without it but SOOOOO much easier with it so conserve it when you can.

To get a conventional Owner Occupied loan you're generally expected to live in the property for at least a year.

Go with a 30 year mortgage.  The rate difference between 15 and 30 years is minimal.  If you wanted to pay down debt faster you could optionally pay extra each month.  Given today's low interest rates, most would say to simply save up the extra payments and use it for another property versus paying off the debt.

Understand with CAPEX and other expenses, few duplexes would cash flow with you living in half the units. You might want to look a bit larger (up to a 4plex) where you'd still get 75% of the rent. If you can find a solid enough investment on that front (say 2% of purchase price in rents)... even living in 1 unit, the other 3 would provide enough income to cash flow. They also help you maximize your leverage (10 $150k loans versus 10 $50k loans).

Originally posted by @Nathan Emmert :

Minimize your down payment... cash makes real estate easy... it's possible to invest without it but SOOOOO much easier with it so conserve it when you can.

To get a conventional Owner Occupied loan you're generally expected to live in the property for at least a year.

Go with a 30 year mortgage.  The rate difference between 15 and 30 years is minimal.  If you wanted to pay down debt faster you could optionally pay extra each month.  Given today's low interest rates, most would say to simply save up the extra payments and use it for another property versus paying off the debt.

Understand with CAPEX and other expenses, few duplexes would cash flow with you living in half the units. You might want to look a bit larger (up to a 4plex) where you'd still get 75% of the rent. If you can find a solid enough investment on that front (say 2% of purchase price in rents)... even living in 1 unit, the other 3 would provide enough income to cash flow. They also help you maximize your leverage (10 $150k loans versus 10 $50k loans).

 Thanks for advice. I defiantly need to plan for what exp I may incur. I don't believe the duplex will provide my any cash flow when I am living there and probably will have to pay a small amount to live their. I am looking at duplexes around 100k or less. 

I would deffinately go with a 30 year loan if you're starting out. Most properties won't cash flow on a 15 year loan and maintenance can be expensive. If a fridge breaks or there is a plumbing problem $1,000 is easy to spend even if you're handy. You never want a situation where you don't have the money to fix the problem or can't pay the mortgage. With a 30 year loan you can build up a savings to buffer the expensive problems when they come up and get back on track after they are taken care of. It's like having an insurance policy for Murphy's law. Whatever is left every month can still be put towards the loan principle to pay it down fast. 

You could house hack alittle. My first house I had 2 room mates there portion of the rent paid the bills, so I lived rent free and saved my money. Than bought my next house and rented the whole thing. If you can get a duplex, rent one side and get room mates then you cash flow till you move on. You could even let your roommate take over that whole side. And it's cheaper than a 4plex.

Originally posted by @Brett Lee :

I would deffinately go with a 30 year loan if you're starting out. Most properties won't cash flow on a 15 year loan and maintenance can be expensive. If a fridge breaks or there is a plumbing problem $1,000 is easy to spend even if you're handy. You never want a situation where you don't have the money to fix the problem or can't pay the mortgage. With a 30 year loan you can build up a savings to buffer the expensive problems when they come up and get back on track after they are taken care of. It's like having an insurance policy for Murphy's law. Whatever is left every month can still be put towards the loan principle to pay it down fast. 

 Yeah good advice and with my price range I will have the money for the unplanned expenses. 

Originally posted by @James L. :

You could house hack alittle. My first house I had 2 room mates there portion of the rent paid the bills, so I lived rent free and saved my money. Than bought my next house and rented the whole thing. If you can get a duplex, rent one side and get room mates then you cash flow till you move on. You could even let your roommate take over that whole side. And it's cheaper than a 4plex.

 My parents suggested the roommate idea it is a good idea. With the one duplex I'm looking at I would be living for free with a roommate or pay a little without. I don't think I'm ready for anything more than a duplex as my first rental. Did you stay in the duplex or get two house after the duplex?

I actually did a SFH. Then got married and moved to the next property which was SFH. I didn't have the funds for a multi on my first, plus it was an off market deal that was a friend of the families house that had been vacant for a few years. So I got a smoking deal. I put things on the back burner for a bit because of having small children and not sleeping. I'm trying to ramp back up which is like starting over.

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