Best Approach to First Rental Property

7 Replies

I have spent the past couple months reading about real estate investing and can't wait to get started. However, we have been debating how we should obtain our first rental property. My wife and I planning on moving to Columbus, OH at the end of January, I was recently approved to work remote. We both are from Ohio (Cincinnati & Dayton) and are fairly familiar with Columbus, but have close friends and family who live in the city that can provide location advice. So we have been debating a couple options,

1) Buy condo/townhouse (possibly without FHA) and then buy single family residence with FHA, move into the SFR and rent the condo

2) Rent apartment, then search for a multi-family to buy and house hack

3) Buy single family home and delay buying a rental due to save up for down payment

I would love to hear any advice or opinions on the options listed above (or any others) as well as, purchasing a property on a short time frame, and using a FHA loan on the second property instead of the first. Thank you in advance!

If you can stand it option 2 gets you ahead the fastest I think. I did that for a year and it was helpful.

Originally posted by @William Harkins :

I have spent the past couple months reading about real estate investing and can't wait to get started. However, we have been debating how we should obtain our first rental property. My wife and I planning on moving to Columbus, OH at the end of January, I was recently approved to work remote. We both are from Ohio (Cincinnati & Dayton) and are fairly familiar with Columbus, but have close friends and family who live in the city that can provide location advice. So we have been debating a couple options,

1) Buy condo/townhouse (possibly without FHA) and then buy single family residence with FHA, move into the SFR and rent the condo

2) Rent apartment, then search for a multi-family to buy and house hack

3) Buy single family home and delay buying a rental due to save up for down payment

I would love to hear any advice or opinions on the options listed above (or any others) as well as, purchasing a property on a short time frame, and using a FHA loan on the second property instead of the first. Thank you in advance!

You can buy a 2-4 unit with an FHA loan. I would look into that. Live in 1, rent the other. Then next year move out & rent both units. Rinse & Repeat until your wife threatens to leave you for making her live next door to tenants every year. At that point buy a SFR & you'll just have to pony up the 25% down payment for the next non owner occupied rental.

@James Wise That option would be ideal, I am just worried about finding the right multi-family in the short amount of time we have.

@Josh C. I do agree that option will help with finding the best multi family when it comes on the market. Just really hoping to not be the renter again.

Originally posted by @William Harkins :

I have spent the past couple months reading about real estate investing and can't wait to get started. However, we have been debating how we should obtain our first rental property. My wife and I planning on moving to Columbus, OH at the end of January, I was recently approved to work remote. We both are from Ohio (Cincinnati & Dayton) and are fairly familiar with Columbus, but have close friends and family who live in the city that can provide location advice. So we have been debating a couple options,

1) Buy condo/townhouse (possibly without FHA) and then buy single family residence with FHA, move into the SFR and rent the condo

2) Rent apartment, then search for a multi-family to buy and house hack

3) Buy single family home and delay buying a rental due to save up for down payment

I would love to hear any advice or opinions on the options listed above (or any others) as well as, purchasing a property on a short time frame, and using a FHA loan on the second property instead of the first. Thank you in advance!

Hi William, my recommendation would be to focus on a duplex first. In general, there are better returns on a duplex than a SFH. I have worked with some really good lenders and would happy to pass on their information to you. A lender would be the best person to look at you financial situation and then give you all the best finance options available to you for a purchase. PM me.

William,

Option 1 - pay close attention to the fees and regulations with HOA/COAs. Sometimes they can make the property negative cash flow or in a worse case scenario prevent you from even leasing the place to anyone but family members. Beware of “special assessments” which can creep up out of nowhere and wreck your whole year if you don’t have some cash reserves.

Option 2 - Best Option IMHO. You can move to the new area, get the lay of the land so to speak and not be rushed. However, as other people have mentioned, househacking and having neighbors below/above/in the next room will definitely take some getting used to and can strain relationships! Great cash flow potential this way!

Option 3 - A safe and good way to go. Can’t really go wrong if you do it the “tried and true” way of saving money for a down payment and conservatively building your portfolio.

Good luck and let us know how it all works out.

Keric Allen

So, this might be a bit radical - and would definitely take some conversations with your wife - but here's what I would do:

  • You mentioned friends and family in the area - I would stay with them on a month-to-month rental basis. This will help you in a few ways - it'll help keep you motivated to find a property (so you can have your own space) and allow you to build your war chest (as cheap/free rent means you can sprint towards any savings goals). 
  • As @Robert Ellis said, definitely get in front of a few lenders as soon as you get there. Get a pre-approval as fast as you can, so you know what price range you're looking in. This will help you narrow your areas of focus and help define what savings goal you should be working toward. 
  • As others have said, the FHA on a 2-4 unit is the fastest way to build your portfolio. If you look at 10 properties a weekend and know your target price range, you'll eliminate some of the uncertainty you're currently experiencing. I own a few SFR rentals, and if I had to do it over again I would definitely house hack a 4 unit as quickly as possible. The higher number of units you have initially means your vacancy risk is lower overall, which can be huge in managing stress.

Good luck, and let us know how it goes!

@William Harkins my wife and I purchased our fist duplex and lived in that sucker for 9 years while renting out the other side.  For many of our friends and family they thought were crazy sharing a house with tenants but for us there was a much larger goal in view.  While I would not have articulated the term "financial freedom" at the time I did have a long term vision of options.  My point, if the goal is big enough sharing a house with tenants isn't really that big of a deal as long as you have a few basic assumptions and are willing to be patient.

Also fantastic advice from@Robert Ellis on finding a lender and getting pre-approved as quickly as possible.  That will be a total game changer for you when you know what you can look for and afford.

And@Shawn Q. suggesting you live with family or friends while you look for a place to owner occupy is a great way to save money for that down payment.  I suggest avoiding paying rent as much as humanly possible and just look for that duplex.

Best of luck!

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