Would You Try To Do Both of These At the Same Time As a Novice
Hi everyone. I apologize in advance for the brevity of this post. If you can stick it out, and give me advice (philosophical or financial), I would appreciate it.
We (my husband and I) are ready to get things going with our investing. The original plan was to partner with someone to do a few flips so we could raise more capital to purchase buy and hold properties, which is our longer term goal. So far so good and we will be closing on our first flip purchase in a few days.
I instigated a deviation from the plan and started to look at cash-flowing multi-families for buy and hold, since I know we have enough to purchase a property already. However, I also have to admit that it would be great to have more capital available. We found a deal in Norristown, PA (anyone who knows the area well, please provide some your insight into which way it’s trending). It is a 6-unit property, which means we would need to get commercial financing. There are 4 units in 1 building and 2 units in another building in the back. The asking on the property is $335,000. It has a monthly income of $4583 and at least one of the units is under-priced (long term tenant, paying less than $600/month for a 2 bedroom unit that should rent for $900+). There is one section 8 tenant that is looking to move out soon. We have only seen 3 of the 6 units, since two tenants changed their locks (with one of said locks having had the lockbox attached which also contained the key to the 3rd unseen unit). We would of course see the rest and do financial due diligence and inspections if we decided to purchase. This is a C class property, but could be improved with some simple updates like flooring, paint and newer appliances. However, they are all long term tenants and satisfied with status quo, so we wouldn’t be looking to update much of anything unless/until they move out. We’ve run the numbers a few different ways, trying to account for worst case scenario and it still seems to be a good investment.
So, what’s my question? First, does it make sense for us to simultaneously attempt to do a flip and to purchase a multi-family, since we are just starting out? Financially speaking, we would have to get creative to do both of those things at the same time. I think I’m OK with that aspect, but I’m wondering if we should just focus on one thing at a time (I know a lot of people recommend this). Second – is a 6 unit property more than we should take on as novice investors? We’ve been accidental landlords before. We knew we wanted to get into the business on our own terms eventually, and initially planned start with SFRs and duplexes, and eventually move into larger properties. We see the value in multi-family, but we’re not sure we should jump right into larger ones. Should we focus on looking at smaller properties that we can get without commercial funding, and so we can learn more about landlording as a business on a smaller scale? I freely admit that I’m leaning more toward this purchase than my husband is. I think there is a part of me that is worried we won’t find another deal like this for a while if we don't move on it. So maybe I’m partially motivated by fear (which, as I type, is irrational and not really a good reason to buy $300K+ of property). The flip side of that is that I’m worried about doing a half-baked job at two things where we could do one thing really well to start out. Maybe that worry answers points to the right answer to my questions?
I have a million other questions, but honestly if you’ve made it this far I don’t want to abuse the privilege. Thank you in advance for your feedback.