Your first purchase: FHA MultiFamily primary residence or OOS

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Your first purchase: FHA MultiFamily primary residence or OOS

Eric Lee
Rental Property Investor · Phoenix, AZ · Member since 2018 · 24 posts · 10 votes

Hello BP Family,

After 2 years of listening to bigger pockets and digesting all the RE books I can find. I have finally saved up enough to begin working on securing my first property. However, I find my self stuck between buying a 2-4 unit FHA for the low down payment or looking in less expensive areas like Indianapolis, Chicago, or some place in the Midwest.

Current situation- I live in Phoenix where real estate is selling at low cap rates and not in the best areas I’d care to put my family and 40k saved up. Any insight is greatly appreciated. Glad to be apart of this community!

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Hassan Karaouni
Bay Area, CA · Member since 2020 · 14 posts · 13 votes
6y

Hey Michael, I'm not the original poster but I share the question in another REI market and I have a question related to your response. You mention the importance of being able to drive to the location (2-3 hours away) and that makes sense to me. Could you clarify:

- In your experience, how often have you actually had to drive to the property? 

- When you did drive to the property, what were some of the most common reasons?

- What are common ways you have seen that remote managers might seek to take advantage of a remote investor?

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  • Michael Noto
    Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
    6y

    This is a very tough decision but from what I have learned through experience about real estate I would advise against your first purchase being in a location you cannot at least drive to (2-3 hours away) when you need to because I am a big proponent on learning the business when you first start. When you own at a non-drivable distance you aren’t learning much and to be honest you are easy to take advantage of by the people managing the property for you. 

    With that said, I would also advise against house hacking in an area you are uncomfortable living in. 

    If it were me I would either save more money to get in a neighborhood that I feel safe in locally or purchase something within a 2-3 hour ride to where you are where the numbers work for you. 

    2Reply
  • Hassan Karaouni
    Bay Area, CA · Member since 2020 · 14 posts · 13 votes
    6y

    Hey Michael, I'm not the original poster but I share the question in another REI market and I have a question related to your response. You mention the importance of being able to drive to the location (2-3 hours away) and that makes sense to me. Could you clarify:

    - In your experience, how often have you actually had to drive to the property? 

    - When you did drive to the property, what were some of the most common reasons?

    - What are common ways you have seen that remote managers might seek to take advantage of a remote investor?

    3Reply
  • Eric Lee
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 24 posts · 10 votes
    6y

    @Michael Noto

    I appreciate the quick response Mike and your post hit on all my current dilemmas. I would love to be more involved in my first few properties to know what areas I should hire out at later in my journey and I can’t necessarily get to Gary Indiana every weekend if needed.

    Secondly, I think saving up alittle be more is what I’ll have to do until I can find an opportunity around the area

    0Reply
  • Eric Lee
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 24 posts · 10 votes
    6y

    @Hassan Karaouni

    Great questions. I too am interested in how hands on he had to be with the properties.

    0Reply
  • Scott Swanson
    Member since 2020 · 92 posts · 39 votes
    6y

    Eric,

    I think Michael has a valid point. However, there are good solid companies out there, that will take care of everything for you. They'll do the rehabs for you, they'll manage them and do everything you're unable to do, because of your location. They allow you to invest out of state and they take care of everything. Yes, you do have to be careful, but they're out there. Best of luck.

    1Reply
  • Twana RasoulBusiness Member
    Real Estate Agent · San Diego, CA · Member since 2017 · 1k+ posts · 1k+ votes
    6y

    @Eric Lee this is an easy decision.  House hack in your area, do not go OOS for first deal.

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  • Eric Lee
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 24 posts · 10 votes
    6y

    @Twana Rasoul

    Would you say it’s due to needing to be close to the property and getting that first year of landlord experience?

    My main problem is anything within my price point may not be the best situation for me to house hack. The price point is not as high as California out here in AZ which is why I left but I’m still finding difficulty in pull the trigger on that first deal

    1Reply
  • Eric Lee
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 24 posts · 10 votes
    6y

    @Scott Swanson

    I’ve looked up a few that were mentioned on the BiggerPockets podcast and really have been getting mixed reviews on using turnkey companies. Are there any that you can recommend Or have used in the past?

    0Reply
  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Eric Lee:

    @Twana Rasoul

    Would you say it’s due to needing to be close to the property and getting that first year of landlord experience?

    My main problem is anything within my price point may not be the best situation for me to house hack. The price point is not as high as California out here in AZ which is why I left but I’m still finding difficulty in pull the trigger on that first deal

    do you have a meet up group you can go to to find a mentor or someone who can help you make decisions? Start here. 

    0Reply
  • Michael Reisman
    Columbus, OH · Member since 2019 · 78 posts · 66 votes
    6y

    @Eric Lee

    I’d recommend Columbus OH. Real estate is affordable here but the market is hot with investors. I assume it’s because of the job and population growth.

    2Reply
  • Eric Lee
    OP
    Rental Property Investor · Phoenix, AZ · Member since 2018 · 24 posts · 10 votes
    6y

    @Alex Olson

    No mentors as of yet and I do feel like that is a component that I’m missing. Being around and connecting with those who are 3 steps ahead so I can learn first hand or provide some sweat equity value. Due to COVID, that has been alittle difficult but you’re a hundred percent right

    2Reply
  • Remington LymanBusiness Member
    Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
    6y
    Originally posted by @Eric Lee:

    Hello BP Family,

    After 2 years of listening to bigger pockets and digesting all the RE books I can find. I have finally saved up enough to begin working on securing my first property. However, I find my self stuck between buying a 2-4 unit FHA for the low down payment or looking in less expensive areas like Indianapolis, Chicago, or some place in the Midwest.

    Current situation- I live in Phoenix where real estate is selling at low cap rates and not in the best areas I’d care to put my family and 40k saved up. Any insight is greatly appreciated. Glad to be apart of this community!

    Columbus, Ohio could be a good place to look at. If you are looking in A locations you will have to settle for low cap rates. 

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  • Alex Olson
    Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes
    6y
    Originally posted by @Eric Lee:

    @Alex Olson

    No mentors as of yet and I do feel like that is a component that I’m missing. Being around and connecting with those who are 3 steps ahead so I can learn first hand or provide some sweat equity value. Due to COVID, that has been alittle difficult but you’re a hundred percent right

    Best thing you can do is to ask how you can help and is there anything you can do for them. 

    1Reply
  • Mike D'ArrigoPro Member
    Turn key provider · San Jose, CA · Member since 2010 · 4k+ posts · 3k+ votes
    6y

    @Eric Lee there are a lot of schools of though on this so you are going to get all different perspectives. The ability to get in with a low FHA down payment is something you can't ignore, however, I am a big believer in investing where you are going to get your best return whether that is local or out of state. If you do decide to go the out of state route, Indianapolis is an excellent choice. I would also add Kansas City to your list.

    0Reply
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