Starting Out

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First time owner occupied

Posted Jun 25 2019, 10:27

How do you feel about an owner occupied 4 Plex or duplex? Iv been looking around for places in my area my wife and I are wanting to buy a place while we are finishing up school. What have you guys experienced with starting your first property those of you who have lived in your first one?

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Replied Jun 25 2019, 11:58

That is one of the best ways to start but the hardest part is actually finding the property and competing with the cash investors.  We got lucky and found the perfect fourplex and it worked out great.  

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Anthony Wick
  • Rental Property Investor
  • Ankeny, IA
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Replied Jun 25 2019, 12:26

It's a great way to start off. And to keep investing more. 12 month owner occupancy, then buy again and move. After I started all over again after a divorce I bought a duplex and remodeled the side I was living in. Then moved out after 12 months and bought another. 

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Replied Jun 25 2019, 20:50

@Margaret Johnson

What kind of cash flow did you experience? and what kind of 4 Plex did you end up with was it like a typical 2 units upstairs 2 units downstairs? The 4 Plex I’m looking at is 4 town home style each next to each other. My worry is it might be a bit too much but this is also a place we would be living for 2 to 5 years and possibly having kids during this time. But I’m wanting to go talk to a loan officer to see what my options are.

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Replied Jun 25 2019, 20:52

@Anthony Wick

Do you think a duplex is better or if I have the chance for a 4 Plex should I go for it? I’m trying to stick closer to the university me and my wife attend.

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Anthony Wick
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Replied Jun 26 2019, 05:50

@Jacob Powell I'd take a 4 plex if available, but do not pass up a duplex if the numbers work either. I like the idea of buying as big as you can afford. Afford is relative. Don't run your funds to zero and have no reserves either. Also, I like to ask the seller for a home warranty for 12 months. It helps you build your reserve funds without a large outlay in that first year. 

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Replied Jun 26 2019, 06:44

We actually bought a fourplex of side by side townhomes.  2 story, 2 bedroom 1-1/2 bath each.  It took us a few months and a fair amount of money to upgrade all of the units and the exterior & turn over the tenants for higher paying ones, but we lived in one unit and rented the other 3 units for 4 years, living rent free in our unit and cash flowing $500-$700 a month on the other 3 units.  After 4 years we are now in the process of selling the place for approximately twice what we owe on it.  We want to get the cash out to invest in other real estate projects.  It was a great experience for us.  If we were to rent the unit we live in, as well as the other 3, and live somewhere else this building would probably cash flow for $1500-$2000 a month. 

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Jerry Padilla
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Replied Jun 26 2019, 08:09

@Jacob Powell

FHA is great way to get started on purchasing up to 4 units, with a low down payment. You can ask the sellers to pay towards your closing costs, to keep your initial cost down.

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Jerry Padilla
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Replied Jun 26 2019, 08:11

@Margaret Johnson

Another consideration, unless you needed all the cash is doing a cash out refinance. For a 4 unit investment property, you would be able to get a 70% LTV and you could still keep your cash flowing property.

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Replied Jun 26 2019, 08:31

We actually do need the cash and we also wanted to move.  Doing a cash out refinance is very difficult with an owner occupied fourplex as it doesn't fit the normal mold - plus if we refinanced we would have to commit to continue to live there and we are ready to move up to more space. 

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Replied Jun 26 2019, 11:30

@Jerry Padilla

If I did a FHA loan witch is probably what I would have to do cause I don't really have a high down payment that I can Put down. Is there a limit of a FHA loan? I have figured out I either buy something or lease one more year and try and save for a higher down payment. I'm just wanting to start putting Equity into something.

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Replied Jun 26 2019, 11:33

@Margaret Johnson

I was figuring that I would have a cash flow of 500 to 1000 bucks living rent free witch doesn’t sound bad considering I pay 1300 now for our apartment. So I would be saving 1800 to 2300 a month while is still work my job. Plus the units I was looking a purchasing are with in 1 mile of a university, so I feel like they should rent really pretty easy each one is a 3 bed 2 bath with an attached garage.

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Replied Jun 26 2019, 12:38

@Jacob Powell I believe quadplex is better than duplex because with a quadplex you could probably have 2 of the 4 vacant and still not have to spend any of your own money, but depending on the rent of the duplex if one person leaves you will probably have to dip into your own cash funds. 

Just my two cents :)

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Replied Jun 26 2019, 12:41

@Jerry Padilla How do you "ask the sellers to pay towards your closing costs" I am looking at doing a VA loan or FHA loan and don't think I fully understand how the seller benefits from paying my closing costs. Thank you in advance for your time and guidance.

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Jerry Padilla
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Replied Jun 26 2019, 19:07

@Jessica Mills

VA you can set a dollar figure to total 100% of the closing costs, other wise you are limited to 6%.

FHA you can ask the seller to pay 6% towards your closing costs.

The seller benefits because they sell the house, but it also takes into consideration the fact that they are paying closing costs so may increase the purchase price of the home. It allows the buyer to get in with less money down.

A real estate agent is going to give the best advice on that piece in your market.

Lender NY (#NMLS 1084877) and Prime Lending Licensed in All 50 States (#NMLS 13649 )

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Replied Jun 27 2019, 22:15

Talked to a loan officer today let’s see where is goes🤷‍♂️. Any advice would be helpful.

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Jerry Padilla
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Replied Jun 28 2019, 20:57

@Jacob Powell

Here are the FHA loan limit look ups. The limit depends on where you live.

https://entp.hud.gov/idapp/html/hicostlook.cfm

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Replied Jul 15 2019, 15:19

@Jerry Padilla

I looked it up so my limit it’s $725,400 for a 4 plex. I talked to my loan officer they qualified my and my wife for $265,000. That to be honest higher then I though we would get, but I’m still unsure what to do to get started on my first owner occupied property. Me and my wife have about $15,000 saved that we could use for a down payment. But there’s not much in the the range that we qualify for. I want to get into something, the only owner occupied rental that is remotely in our range is $300,000 it’s a duplex that brings in 800 a month out of the basement. I’m worried though that once we move out that the property won’t generate a positive cash flow. The mortgage would be about $1900 a month. So 1100 of that we would be paying for our “rent”. Would it be better if I tried to bring on a partner to get something better? What are your guys thoughts?

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Replied Nov 15 2019, 13:55

Sorry - I have been offline for awhile.  We purchased a fourplex and lived in one unit and rented the other three.  We lived rent free and cash flowed between $500-$700 a month once we updated the units.  After 4 years we sold the place for nearly twice what we paid for it.