I'm a currently saving up and learning all that I can from BP. My first investment will be a duplex or higher. My plan is to stay there for the required year and then refinance to purchase another property. I'll be using the FHA / 203k loan and maybe utilizing the dealer concession. I'm curious to know about personal experiences from people investing in MFs owner occupied. What are the biggest downfalls to prepare for loan and refinancing wise as well as living there? Would you prefer brand new vs older? If you could do it all over again what would you do? Any comments are greatly appreciated.
Don't be afraid of investing in older properties that need work. That's how we build equity. My first property was a duplex. I lived in one side and rented the other. It worked great for me. I had a great tenant so there was no problems. Since I was living on property I could stay on top of issues. Go for it!
Amber, I did a similar thing and lived in one of the units of my duplexes for a year, and it worked out great. The rent from one unit was enough to cover the mortgage payments, so I lived essentially rent free for a year. Also, during that year, I was able to do some renovations to my unit (the property needed some work when I purchased it) which increased the value of the property.
There are some potential downsides, most notably if you do not have a good tenant. In my case, I hired an outside property management company & never told the tenants that I was the owner. In retrospect, that was a really good decision or else I would have been inundated with requests.
@Amber Koontz - purchasing 2-4 unit properties is a great way to get started. You will learn the pros and cons of REI.
Finding a property below market value and adding value will make the refi easier to get your loan replaced as it will typically be at 75% LTV without cash out.
Don't forget to factor in PMI into your underwriting for expenses.
Also, a reserve fund is a must! Good luck!
@Jeff Morelock Thanks for the feedback. How extensive was your tenate screening? That can make all the difference after the fact.
@Matthew Schroeder Thank you for the feedback. Using a PM could definitely save on the constant hassle when things are hectic. I was thinking of obtaining a PM for triplexes on up, but it could be just as useful for a duplex.
@Eric Munson Thank you as well for the feedback. I will be sure to work within the 75% LTV. PMI so far is the only downfall to using an FHA loan. I will research what a reserve fund is, that's new thus far in my educational experience. (All of 4weeks! Lolz)
reserve find would be a cash stash for repairs and maintenance. Basically any howeowner wether an investor or not should have it. In this case it would also cover vacancies.
The tenant was there when I bought the place, and he stayed when I sold it.
My first and last investment was a duplex, I grew up in one. As mentioned hire a PM and you do not identify as owner.
Consider checking out HUD homes for small multi's owner occupied gets first crack.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing