First Timer - Single Home or Owner Occupied Multi Family

16 Replies

Hi Everyone!

I'm brand new to the Bigger Pockets site, and I wanted some advice on what to do first. I'm interested in buy and hold investing, and I'd like to buy my first property in the next 120 days.

I'm in the Minneapolis/St. Paul market and I'm trying to decide if I want to purchase a single family home or if I want to purchase a multiplex of some kind, and live in one unit and rent out the rest.

I definitely see some pros and cons to both but I wanted to know what you thought would be a better idea for a first timer.

Also, are there any books/resources you would recommend on owner occupied multiplex rentals?

Thanks for the help in advance!

Hi matthew, I'm in the same boat as you are and this community has been great. But I think I will wait by the end of the year and see how the market is

Welcome to BP @Matthew Hanrahan ! You're on in one of the best places to learn more about investing and to help you make the decision that fits you best. As for resources/books you can do a search on here regarding multi-family rentals, rentals and even helpful books to read them. Multiple threads will and recommendations will come up but as you search you can find what is helpful.

10x by Grant Cardone and What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures by Frank Gallinelli are two books.

Also the BP podcasts on here are great to listen to when you have a moment.

I wish you all the best in your endeavors.

Welcome to BP! As others have said, there are pros and cons of each. But to give specific advice to you, we'd need more specific information, such as how much cash do you have to put down? Will you live in the SFH if that's the route you go? If you use an FHA loan, you'll only have to put 3.5% down. If you go SFH, that means you'll have to live in it first before renting out. If you go MFH, you can use the same type of loan, with small down payment, and rent the other units out. Depending on loan amount, payments, rents and other factors, the rents may pay for the mortgage payment, meaning you'd be living for free! But it all depends on the specific situation.

Obviously, there are MANY MANY people in this community willing to help, so feel free to keep asking questions! Welcome!

Hi everyone, I'm on the app so I don't think I can't tag you but I appreciate the advice!

I haven't talked to a mortgage broker yet, but that will be next step. I have some money to put down, but if possible I'd rather put down the 3.5% FHA loan so I can keep my portfolio diversified in paper assets.

Would it be more useful to talk to a mortgage broker first or to look at properties first? Also, does anyone have a good recommendation for a mortgage broker and real estate agent in the MSP/STP area?

Matthew,

Since you are willing to live in the multi-unit building, I would choose that option. Let the tenants pay your mortgage and see if being a Landlord suits you. If so, in a few years buy another multi-unit building and move into that one. You get the idea.

Rich Baer, Esq.

Hey! 

I would definitely seek some advice from a mortgage broker, try to find one that invests in RE. They will have a better long term outlook/strategy for you, and be able to give good advice. Also getting the process started will allow you to make offers on deals you spot, having less conditions than other buyers.

I chose to go the route of MultiFamily. More doors under one roof gives me a cushion against vacancy. Downside being more trouble to manage, /w maintenance and turnover likely being higher than SFH.

Also I'd try and go /w as low of a downpayment as possible, my first property I put 20% on, and it hindered my ability to jump right into my next property. 

Goodluck /w your hunt! 

Here are some of the real estate investment books I have found incredibly helpful!

  • Rich Dad Poor Dad (by Robert Kiyosaki)
    One of the very first books almost any investor will recommend! While there are few specifics on any particular kind of investing, this book lays down the mindset, philosophy, and attitude that any aspiring investor needs to have. This book has changed many lives, my own included.
  • Rich Dad's Guide to Investing (by Robert Kiyosaki)
    This is an excellent followup to Rich Dad Poor Dad that starts establishing some general guidelines for real investments. Again, there aren't many solidly actionable plans, but this goes considerably deeper into the obstacles, strategies, and rewards you will experience as an investor.
  • The Book on Rental Property Investing (by Brandon Turner)
    This is a great one right from the BiggerPockets community! Whereas Rich Dad Poor Dad is a necessity for you to begin understanding the broader aspects of investing in real estate, this one offers up up actionable advice and plans on the specifics of how to find, analyze, finance, renovate, and/or rent essentially any kind of residential real estate. Truly a must-read!
  • Rich Dad Advisors: Loopholes of Real Estate (by Garret Sutton)
    This one is primarily a battleplan for minimizing your risk and protecting your assets. We live in a world of high litigation, so knowing how to protect yourself, your properties, and your cashflow is absolutely essential! Critical read for any real estate investor.

There are many other outstanding books out there, but reading just these four will arm you with a solid foundational education in real estate investing, from the mindset, to the specifics of choosing and acquiring properties, to how to protect yourself and minimize your tax obligations. There's always more to learn, but anyone who takes the time to study and understand these four will likely be able to start making deals and enjoying their rewards!

Hello everyone, 

I am new to the community and investing.  If you had $20k to 50k to invest  What type of real estate deal would you pursue/invest in.   How would you start you investing?  

@Matthew Hanrahan  If you do nothing else in real estate, you will have succeeded by getting into a fourplex as a young man with only 3.5% down. Assuming the rents cover your expenses, in 30 years and the mortgage is paid off, and you’ve done the smart thing by raising the rents over the years, you will be sitting on a multi-million-dollar asset that cash flows thousands of dollars per month at the cost of a measly $20k or so out-of-pocket when you were 20- or 30-something. I can’t think of any better way for young people with limited resources to prepare for their future so early on in life with so little cash out-of-pocket. Run the numbers and see for yourself.

One thing to keep in mind when looking for an FHA owner-occupied triplex or fourplex is that 85% (75% in some states) of the sum of the market rents on all units (including the one you will be occupying) need to cover your monthly payment (principal, interest, taxes, insurance, and mortgage insurance). This is known as the self-sufficiency rule. It only applies to 3- and 4-unit properties (not SFRs or duplex) bought using FHA financing. I put together a spreadsheet here to help potential house hackers quickly analyze whether or not a property qualifies. There are other FHA requirements concerning which you should contact your local lender, but determining whether or not a triplex or fourplex meets the self-sufficiency rule is a good place to start as this rule will immediately eliminate many properties from your search, especially in expensive markets.

Good luck!

Originally posted by @Collette Scott :

Hello everyone, 

I am new to the community and investing.  If you had $20k to 50k to invest  What type of real estate deal would you pursue/invest in.   How would you start you investing?  

 That's a big question with a lot of different answers depending on a wide variety of factors! Which is to say, "it depends!"


Personally speaking, if I had $50,000 in my bank account, the first thing I was do is tear up a little and pump a celebratory fist skyward. I've never broken $10k I'm sorry to say! But hey, young guy who is only just getting started. As far as my personal investment plan goes? Well, assuming I didn't have the expertise or education to make the best decision for myself yet, I would temporarily set that aside in a growth account and take the time to learn! 

I'd start with a few books (I recommended four above) to help build a solid foundational knowledge of the skills and information I needed to succeed, and then I'd attend some local real estate investment groups (you can find them on Meetup.com usually) to network a bit, and speak with other folks who knew my area very well and were active in investing in it, so that I could get an idea of the locations and properties I should be investigating, and also to get some recommendations for a great local realtor with considerable experience in investment deals!

At this point, I would have to consider how I want to use that $50,000. Do I put it all into one property to minimize the amount I need to finance, thus maximizing my cashflow? Do I divide it between several properties? It will take some thought and some research! Once I have a good idea of how I want to use the money, what kind of properties I want to invest in, and the general areas I'm looking to find those properties, I would contact the most highly recommended realtor my new local investor friends could suggest.

Upon sharing my search criteria with him or her, my realtor could then pass along several relevant properties for me to consider. Using the skills I learned in analyzing properties and cashflow from the books I read (again, posted above), I could determine which of those properties had the most potential and investigate further, and possibly even submit a couple of offers on the properties that had the greatest estimated cashflow! I would of course keep in mind that I am looking for great deals, which generally means I might have to be willing to make some "lowball" offers, and that many of them will probably be rejected.

Once I do find that good looking deal and have my offer accepted, however, I'm still not quite out of the woods! It's time to do all my due dilligence into the property. I would have very thorough inspections performed to get the best possible overview of the property and what kind of condition it is in, and use those results to help more accurately estimate the financials of the property. If my projected cashflow statement still looks good, even after be able to factor in the short and long term costs of upkeep, I can pull the trigger! Hurray!

It's all about a dedication to self-education, careful planning, and thorough analysis. I can't tell you specifically what your investment plans are or should be, nor could I tell which properties or neighborhoods are most promising in your area. As a beginner myself, and one not familiar with your market, about the best I can do is point you to some of the resources I've used to help me gain the information, confidence, and skillsets needed to succeed in real estate investing. So, please, take your time with that money! Don't drop it on a deal just for the sake of forward momentum unless you're armed with the knowledge that you need to ensure it is a good deal! 

Good luck!

Zachary, that was the best information and advice I received all year.  I am researching and reading books to educate myself, however, with so much information, you really have to pin point which strategies you going to use for your current position, etc.  Now,  working on my  business plan,  I want to know if I need to have my real estate license. I've talked with a real estate investor who had his license for 10 years, never sold a house.  

Originally posted by @Collette Scott :

Zachary, that was the best information and advice I received all year.  I am researching and reading books to educate myself, however, with so much information, you really have to pin point which strategies you going to use for your current position, etc.  Now,  working on my  business plan,  I want to know if I need to have my real estate license. I've talked with a real estate investor who had his license for 10 years, never sold a house.  

 No, definitely not! There are some advantages to having your real estate license as an investor, but many highly successful ones don't (including Brandon Turner, who wrote "The Book on Rental Property Investing").

The main benefits of having your license are that you can browse the MLS for great deals yourself, in representing yourself you can cut out many of the delays you might experience using a middleman, you can "pay yourself" when buying properties by collecting your share of agent commission, etc. Definitely some nice perks, but nothing crucial.

If you don't get your license yourself, there are almost certainly local realtors with experience in real estate investing who could help steer you right. Check out a local REI group on Meetup.com or a similar website and attend a meeting. Speak with the local pros and they can most likely point you in the right direction on finding a great agent.