First investment property

Matthew Mello · 2020-02-10T16:47:13-08:00

So, I’m new to the forum after listening to a couple podcasts it seems like an awesome network and I’m just looking for some advice. I just graduated from college about 6 months ago and I have some money saved up and a lot more invested (mostly stocks, 401k, whole life insurance). I have enough to put down on a multi family house and still have some extra for minor repairs in cash. I don’t mind disclosing amounts if it helps me get advice but basically I would be comfortable dropping about $15k cash to get started between downpayment and minor repairs. Labor to me is at no cost due to my dad doing household improvements for his profession, just materials. I am targeting the providence RI area due to colleges and the city starting to boom because Boston’s getting way to pricey (lives there for the past 4 years so I know it’s worth the commute in from Prov) but the taxes scare me a little bit so I wouldn’t mind grabbing units in the south eastern part of mass, like Fall River or Taunton. What’s out there for advice? What should I be looking at for max budgets. My goal is to live in one of the units and have the other two pretty much cover the houses expenses if possible. I work full time in providence and have wayyyy to many student loans to pay back which will eat a bulk of my income that’s why I’m heading down the route of a multi family house. Any and all advice welcome. Thank you

Anthony ThompsonPro Member

Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes

6y

@Matthew Mello welcome to Bigger Pockets!

Based on what you described of your situation, it sounds like a multifamily house hack, with maybe a bit of a fixer upper or value add (upgrade units) would be ideal.

It sounds like you already have that idea, with your goal to live in one of the units. Minor advice: if possible, live in the worst unit (often the third floor of a 3-family but not always), rent out the others for higher rents and upgrade your own unit as you go.

Then if others need work, once the first one is done, move down to the second-worst if a vacancy opportunity presents itself, etc.

With your student loans, I'd recommend talking to a good mortgage broker or loan officer sooner rather than later, so you know what you can realistically afford. I think they'll be able to help you out as far as max budgets far better than we can here on BP.

If find a good property, I know a lot of folks who are really into Fall River, New Bedford and Taunton these days. There are different opinions about how much prices have already risen there vs. how much they still have left to go, but taxes aren't great in Providence/RI either (Providence has a higher tax rate for landlords too, blech) and arguably those areas have more room to grow.

Just make sure you can take the commute, try it out during the morning and evening rush hours, that 195 stretch can be a bear :-/

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Matthew Mello

OP

Fall River, MA · Member since 2020 · 12 posts · 2 votes

6y

@Anthony Thompson yes that’s the goal. Just looking to see if anyone in that area can help me figure out what a true cost would be. I know providence is real weird with their taxes on the units you are not living In

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Anthony ThompsonPro Member

Buy and Hold Investor · Cranston, RI · Member since 2013 · 1k+ posts · 1k+ votes

6y

@Matthew Mello if I were you, I'd try to do an "apples to apples" comparison between the two alternatives you're most interested in.

For example, pick a neighborhood in Providence and one in Fall River, and then find a 3-family on the market in each, with the same # of bedrooms and roughly same square footage, roughly same parking situation, etc.

Then start working up a spreadsheet of income and expenses for each. Call an insurance agent and ask how much the yearly insurance would be in one vs. the other. Call the city/town and ask what the most recent tax bill was, and what it would be for non-owner-occupant (the usual formula is assessed value / 1000 x tax rate). Find out what market rents are for those units in the two areas, etc.

That will give you an idea of some of the different numbers on paper.

But also be sure to actually drive through the areas, ideally both during the week and on the weekend, during the day and at night, to get a feel for the areas. Ask which one you'd want to be stuck in for the next 10 years, if the market fell and values dropped and you couldn't sell for a decade.

Knowing some numbers is good but try to keep the soft factors in mind too. Sometimes a 1% lower cap rate is just fine if you feel a lot better about a property/area than another one with a slightly higher cap rate.

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Account Closed

Kingsland, TX · Member since 2018 · 164 posts · 86 votes

6y

Welcome to BiggerPockets @Matthew Mello! How did you hear about BiggerPockets?

I would recommend looking into an FHA loan or the Fannie Mae HomeStyle Loan Program. The FHA would allow you to put less down (3.5%), allowing your $15k to go further. The HomeStyle Loan allows you to bundle your rehab costs into the mortgage. This would let you purchase houses that may need more than just minor repairs. However, with the HomeStyle Loan, the more units the property has, the larger the required downpayment.

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Matthew Mello

OP

Fall River, MA · Member since 2020 · 12 posts · 2 votes

6y

@Anthony Thompson

Thank you so much for all the advice! Yeah, I grew up in Fall River and have been back there for a few months now so I know that commute can be awful once you hit exit 1. On the other hand I’ve also been commuting to Boston for the past few months so nothing is worst. Haha

Again thank you for your time I appreciate it

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Matthew Mello

OP

Fall River, MA · Member since 2020 · 12 posts · 2 votes

6y

@Lauren Juarez

Hey Lauren, actually through podcasts.

Yeah, I was thinking of a 203k but they can get picky on who does the work. I would have to chat more with the lender on that and see what I can do myself and what has to go through someone they approve. I do not know this for a fact but it is what a friend of mine told me.

I have pretty spot on credit with a good amount of credit history for my age. So my plan of attack would be get one of these mortgages until I gain some equity and then refinance it to get rid of the awful PMI

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Bud Gaffney

Rental Property Investor · Boston, MA · Member since 2019 · 2k+ posts · 1k+ votes

6y

@Matthew Mello Welcome Matt! Perfect opportunity to house hack. I own several multi's in Taunton, Fall River, New Bedford so I'd love to give insight if you have any questions. If I was you, I would buy a 3 or 4 family, live in 1 of the units and rent out the others. I would then get a HELOC and buy another. Repeat until you're as financially free as you'd like to be. Here if you need anything!

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Gualter Amarelo

Investor · Fall River, MA · Member since 2014 · 399 posts · 300 votes

6y

@Matthew Mello I love where your head is at and you are doing the right thing by considering a multifamily house hack!

That is the same strategy I have used to build a $4MM real estate investment company here in Fall River and we still stick to that principle of a 2 units to pay the bills and the third unit is cashflow model.

If you have any questions about investing in Fall River feel free to join one of my free Saturday morning trainings to help local investors become millionaires!

Cheers to your success and to making Fall River an amazing place to live and invest.

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