Looking for a multi-family REI

7 Replies

Any advice to somebody whose starting out in REI. I was recently pre-approved and my lender told me to start looking at homes so we can get the numbers down. I live in Waterbury CT and there is pretty much nothing good on the market right now to even consider. I'm not looking for something where I have to do major constructions or old and outdated and my max budget is 200K. I really want a 3 family but I'm starting to consider a duplex because they are more up to date and better looking than the 3 families I've seen but the downside to the duplex is I won't produce as much cash flow as I would like. Any advice on whether getting a duplex or 3 family for your first REI? Or any advice in general would be helpful.

Are you going to be living in one of the units? What are typical prices per unit in your area?

If you're buying on a budget, then you have a maximum price per unit that you can pay. Duplex is $100k/ea, triplex is $67k/ea. That's a big difference! You'll probably be in different quality submarkets based on that alone.

When you look at your area, based on this budget, what's the quality of properties you can buy?

I would focus on buying in lower crime, better schools, higher demand neighborhoods. It's more likely you can find that with the duplex budget than the triplex budget.

I think it's time for you to go look at some deals and see which ones you like and don't like!

A duplex could definitely produce the cash flow of a triplex for the same reasons Taylor said. Given a cheap enough unit in a nice neighborhood as opposed to a REALLY cheap triplex (price per unit, remember) in a crappy area, you'd have money remaining to update both units and increase the rent. 

@Taylor L. @Matthew Reichert

I do plan on living in the property as I am doing a FHA loan but only for about 2 years. The quality of the homes in CT for 200K is not bad at all especially for a duplex I can find something nice that's pretty much move in ready. The only reason why I'm concerned about Cash flow with the duplex is because if I'm living in one I'm only getting that 1 units income where as if I did a 3 family or Tri-plex I would have an extra unit while living there so 2 units income and the extra one when I move out which would be 3 units income. For a triplex finding something nice in that range is a little bit tougher as the nicer ones are about 30-50K more. But I'm only 24 so I don't want to start off that high just yet and/or nervous about going that high.

Hey Dominique, I started in Waterbury with the exact same strategy as yours. Be patient, the right property will come (mine was a duplex with an extra in-law studio). Just be ready to act when you see it, the good properties go extremely fast. Fell free to message me if you want to discuss anything else.

There are plenty of 3 family properties in Waterbury on the market for under $200k.  As for the age of the properties, yes, they generally skew older but that's the case around the entire state in regards to most 3-4 unit properties. 

My advice would be a little different than those above. Don't worry about the age of the house or if it's aesthetically pleasing to the eye. Also, don't worry about the price per square foot. Find a property that you would like to own based on location and the numbers, decide how much you'd like to cashflow on the property, then make your offer based on those numbers. 

I understand that you're going to live there for 2 years. But at the end of the day, it's an investment. So the only things that matter is your level of comfortability managing it (good areas vs war zones), and the property's profitability.