Real Estate Agent · Los Angeles · Member since 2020 · 14 posts · 10 votes
Hello, this is my first post and I'm in the initial stages of learning about real estate investing.
I want to house hack a duplex (possibly triplex). It'll be my first/only property but I want to be able to afford the entire mortgage alone as if there are no tenants. I feel like this eliminates the risk associated with vacancies and renters that fail to pay but is this too cautious of an approach and am I just limiting myself on what I can buy without good reason?
My only other thought is to use the emergency fund I'll have to cover several months of expenses if I do have a vacancy or if I go through an eviction process.
Hello, this is my first post and I'm in the initial stages of learning about real estate investing.
I want to house hack a duplex (possibly triplex). It'll be my first/only property but I want to be able to afford the entire mortgage alone as if there are no tenants. I feel like this eliminates the risk associated with vacancies and renters that fail to pay but is this too cautious of an approach and am I just limiting myself on what I can buy without good reason?
My only other thought is to use the emergency fund I'll have to cover several months of expenses if I do have a vacancy or if I go through an eviction process.
Thanks!
The way you are doing it is smart. Eventually, you will have a vacancy and that means you will have to pay the entire mortgage on your own. I would suggest an emergency fund that would cover 3-6 months of mortgage payments.
Hello, this is my first post and I'm in the initial stages of learning about real estate investing.
I want to house hack a duplex (possibly triplex). It'll be my first/only property but I want to be able to afford the entire mortgage alone as if there are no tenants. I feel like this eliminates the risk associated with vacancies and renters that fail to pay but is this too cautious of an approach and am I just limiting myself on what I can buy without good reason?
My only other thought is to use the emergency fund I'll have to cover several months of expenses if I do have a vacancy or if I go through an eviction process.
Thanks!
The way you are doing it is smart. Eventually, you will have a vacancy and that means you will have to pay the entire mortgage on your own. I would suggest an emergency fund that would cover 3-6 months of mortgage payments.
Cincinnati, OH · Member since 2020 · 4k+ posts · 3k+ votes
6y
@Johnathan Walton, making sure you can afford a property is always recommended. Especially with a duplex, I would determine what you are comfortable with for your monthly mortgage payment, and can be approved for, and look in that price range.
When you get to a 3 or 4plex, obviously, the chances of you having all other units vacant is less, but it is still not a bad way to get into it. Then the rents coming in from other units are just bonus.
@Johnathan Walton I think you are doing it right, as that means should your income suffer a disruption (like this whole COVID affair) you will be able to continue paying your debt. Just as important is, as some other posters mentioned, a well-funded emergency fund. Having both of those present sounds like you will have a solid financial base in order to expand. No one foresaw this pandemic for example, but those with well-funded emergency funds are riding out the panic and not worrying about losing their rentals.
Real Estate Agent · Fleetwood, NY · Member since 2018 · 264 posts · 235 votes
6y
@Johnathan Walton you're approach is smart, like the others have already confirmed.
My advice is the same as Evan's - I would just take note of what you're buying. In a duplex that you're living in, the chances of you having to carry the whole house is high because it only takes one vacancy or one tenant who doesn't pay. In a triplex, the chances go down because there are two other units. And in a 4-plex, they're even less.
Hello, this is my first post and I'm in the initial stages of learning about real estate investing.
I want to house hack a duplex (possibly triplex). It'll be my first/only property but I want to be able to afford the entire mortgage alone as if there are no tenants. I feel like this eliminates the risk associated with vacancies and renters that fail to pay but is this too cautious of an approach and am I just limiting myself on what I can buy without good reason?
My only other thought is to use the emergency fund I'll have to cover several months of expenses if I do have a vacancy or if I go through an eviction process.
Thanks!
I say do both. Buy what you can afford, and have a 3-6 month emergency fund. It makes you pretty bullet proof. As you begin to scale up, your cashflow from other properties will carry properties that may not be performing as well.
When you begin working with a lender, be sure to explain to them that you do not want the rental income included in determining how much you are qualified to buy for. Most lenders include rental income for MFR buyers as a default as that income is considered in determining what you are eligible for loan wise.
Investor · Philadelphia, PA · Member since 2016 · 2k+ posts · 1k+ votes
6y
@Johnathan Walton it’s a good strategy, but it may be limiting. You’ll know when you start looking at properties and seeing their price tags. Maybe you’ll be able to find what you’re looking for in the type of neighborhood you want to live in. Or maybe you’ll realize that you might only be able to cover 75% of all expenses without a tenant.
And that’s ok. Work the prices into your comfort with risk. Maybe your math accounts for 25% vacancy. Maybe 50%. Maybe 90%. It’s what you’re comfortable with.
But whatever you do, don’t buy in a worse neighborhood just to meet your finance decisions.