I am currently living in a condo with a roommate helping me pay my mortgage. I re-did the kitchen, floors (hardwood), bedrooms and finished the basement. I am looking to use the equity I built in this condo as well as money I am currently saving to jump into real estate investing. My first move would be to use my VA loan (no money down) and either get a Duplex/Triplex, live in one of the units and rent out the rest for a year while invest in other properties. I would fix up my side while living there most likely - touch up the other sides before renting out. I live in Worcester, MA and the real estate here is very expensive. For a Duplex I feel I have to get no more than a 250k property to break even while living there (been looking around and hard to find). A Triplex would cash flow more, but it would be a big stretch (Maybe future rent would help me get one) and I feel be better long term. Should I start with a duplex and have not much cash flow if any or try to stretch into a triplex? Any areas around worcester that people are currently investing in that has been working well and a little cheaper?

Remember there are a lot of things to consider other than getting as many doors as possible. More doors could pose more risk if it stretches your finances thin and requires you to move on a property without adequate reserves. A 3-4 unit is going to attract different tenants than a side-by-side duplex. That can impact management costs and your experience as a landlord. Location is critical as others have pointed out, and availability of different types of properties will vary by location. A lot of these decisions depend on your risk tolerance and personal goals. If all things are equal definitely get as many doors as possible, but don't forget to consider other things and also don't take a property with more doors if it is less profitable than one with fewer.

@Jacob Pereira there are very few 4s In Worcester. But there are some. Many 3s The key is location. You need to know exactly what you are buying as the next street over may not even be close to thr same neighborhood. It is well worth it Long term to buy for location/neighborhood as that is where the best rents are and where the appreciation occurs. Also keep in mind you can rent parking and garages You can also subdivide lots to increase value. If you buy wrong or without knowledge of where you are buying it can be a big problem if there is a downturn

@Wendell Butler the more units you can get the better. If you can raise rents $100/mo per unit per year, it’s better to have 3 units than 2 units. Honestly, I’d recommend a 4plex. That was our first house hack purchase, and it helped expedite our savings rate to catapult into the next one.

@Wendell Butler Yes, goes on your schedule E. I'm also a tax accountant if you have questions about that. Understanding real estate tax is very critical as you can do something completely innocent that costs you 10s of thousands in extra tax.

@Wendell Butler Yes, I have had underwriters sign off on using rental income with less than 2 years' history on tax returns. A fallback can be to bring on a property manager (as extra insurance), but I'd push for using 1 year of rental history on your tax returns. You could bolster your cause by pulling data together to show you're buying in a strong market for rentals. And you can bolster your cause by taking landlord training at that link above.

@David Pere true, I did read up on that as well. Good point!

And FWIW, I like more doors as do many of the posters above, @Wendell Butler. You're likely to get better cash flow (initially and when you move out) and less likely to have multiple vacancies all at once.

@Wendell Butler Lender here! I've worked with a good number of house-hacking veterans... such a great option. You just need to know the guidelines -- or make sure your lender does anyway. :)In case you've not already found them, the VA underwriting guidelines are available here. Chapter 4 (new) is where you'll find information on rental income. Page 25 of the document is where it starts. I'll paste the rules for a multi-unit property below for easy reference. If you've got prior experience managing another property, you should be able to include 75% of the rent from the other units (actual leases in place) on a subject multi-unit property as part of your qualifying income. Worst-case, you might need to sign a contract with a property manager to convince an underwriter you will be successful as a landlord. You might help you case by showing you've taken landlord education. There's a free course from MGIC (a PMI company) here. You'll need to have 6 months PITI reserves from your own savings. And if you're keeping your current residence and converting it to a rental there are some additional rules to consider: You'll want to have a lease signed prior to closing (technically not required, but tough to do without), rent can do no better than offsetting the payment (positive cash flow is not allowed), you must have at least 3 months PITI in additional reserves for that property. For other rental properties the guidelines do require that you show a 2 year rental history on your tax returns. (Admittedly strange that the VA allows a new lease for your old residence that you're renting out for the first time, but wants two years' history for an established rental, but that's how the guideline is written... loan rules are maddeningly counter-intuitive sometimes.) Good luck! LMK if you have questions!

House Hacking - Duplex or triplex?

Michael DeLaMarre

Member since 2020 · 25 posts · 27 votes

5y

If you can find a side-by-side duplex in Worcester in a nice mostly single-family neighborhood it will rent out for a premium. A remodeled 3BR unit in a triple decker will rent for $1700-$1900/mo but a remodeled 3BR single family house will rent for $2000-$2200/month.

I have a side-by-side duplex in a single family neighborhood and the units rent more like a single family than a triple decker. It seems easier to find duplexes in the better areas of Worcester also, so you might have more to choose from.

6 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Michael DeLaMarre awesome to know! Do you have any areas in Worcester you would recommend. I won’t be making this move until august (saving up and educating myself ). So I have time to really research and look around which is good.

0 Reply

Michael DeLaMarre

Member since 2020 · 25 posts · 27 votes

5y

Definitely good to read up before taking the dive in.

If you go on neighborhood scout and look at a crime map you'll get a good idea of the nice areas. Be careful though, because areas can change street-by-street. My duplex is in the Beaver Brook neighborhood on Walworth St. I'm on a good street, but a few blocks east of me it turns into Main South (not so good).

I like a lot of the neighborhoods on the west side of Worcester just North and/or West of Newton Hill. I also like the neighborhoods off of Lake Ave just south of route 9 and the area off Plantation St. just north of the EcoTarium. I've heard a lot of good things about the North side of Worcester (east of Indian Lake), but haven't ventured up there mich myself.

Also don't underestimate the "cute" factor. Our duplex is a cape house with a second unit built off the back. My wife immediately deemed it as the cutest place she had seen in Worcester. It turns out most of the tenants have the same reaction, so it rents out pretty quick.

2 Reply

Spenser Hachey

Member since 2019 · 7 posts · 0 votes

5y

Hey Wendell, I'll second the West Side of Worcester - although I dont own any real estate there, I've spoken to long time Worcester real estate agents and they say the West Side is considered "suburban" Worcester. I'm going to start looking at side - by - side units myself.

0 Reply

Brian J Allen

Real Estate Agent · Worcester, MA · Member since 2018 · 517 posts · 409 votes

5y

There is a lot more to Worcester than the west side! Lots of cool neighborhoods and plenty of places you can make money on with the right focus. Side by side units garner better rents, but location is the key. I suggest seeing about 10 buildings before you make a decision. I go out with groups on Saturdays to get people educated, let me know if you want to join. Keep in mind that most of the good properties in Worcester trade off market, prior to MLS, and if something nice gets to MLS you need to be ready to jump. That is why you need to know the market and the neighborhoods. PM if you want to join on a Saturday Worcester Tour.

0 Reply

Filipe Pereira

Property Manager · Windsor Locks, CT · Member since 2016 · 1k+ posts · 1k+ votes

5y

Definitely stretch for the triplex if you can @Wendell Butler. I try to buy real estate for "future me" not "current me". Future me would want the extra unit to help with the overall financials versus just having the duplex. It will also help you currently (economies of scale almost always win) as long as you can make the numbers work on the buy side in terms of financing.

1 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Michael DeLaMarre awesome, thank you so much for that information! I appreciate it, and will definitely keep all that in mind.

1 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Spenser Hachey I will definitely have to take a drive around there, I have not really explored there much! Thanks for your input.

0 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Brian J Allen great input Brian! I will definitely start coming out soon to get a feel for properties and start learning more. I will keep in touch and I appreciate your emails so far!

0 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Filipe Pereira that’s exactly what I was feeling too, just a matter if I can initially get qualified enough to get in the range of some triplexes. Appreciate your insight!

1 Reply

Wale LawalBusiness Member

Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes

5y

@Wendell Butler

Depending on your numbers and amount of funds you can afford.

I would go for Triplex if possible.

[email protected]832-776-9582 Podcast Guest on Show #469

NETWORTH BUILDERS5236 Reviews

Website View Page

1 Reply

Caleb Johnson

Investor · Mesa, AZ · Member since 2019 · 53 posts · 63 votes

5y

Hey Wendell, I house hacked my first 4-plex and was cashflowing from day 1. I found that the income from the other renters was able to pay for a lot of the repairs so I don’t need to take out of my savings as much.

When you say stretch what do you mean? Let me n one of this helps, good luck.

1 Reply

Ian Hogan

Real Estate Agent · Boston, MA · Member since 2019 · 62 posts · 85 votes

5y

@Wendell Butler Like several of the others in this chat, I would recommend at least triplexes in the Worcester, in terms of cash flow this is the best option that I have seen, although I'm interested to look into the more suburban duplex numbers that were mentioned.

As far as VA loan goes, if you haven't dealt with this yet or looked into it, I would recommend looking into what the VA inspection and VA appraisal look for to mentally get ahead of the process. When you are looking at properties over time you will get to know the common oddities that come with some of these older buildings, if you haven't seen any at your current residence.

- Ian Hogan

0 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Caleb Johnson by stretch I mean based on my current income currently for what I can qualify for. I wouldn't buy outright cash, I would utilize my VA loan for my first house hack. Worcester triplexes seem to be quite expensive and possibly out of my range to qualify (unless I can utilize future rent income from other units).

0 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Ian Hogan that's an excellent point. The VA does have different aspects to the inspection/appraisal. This will be my first use of it so I'll definitely need to study up!

0 Reply

Arthur P.

Real Estate Broker · Pinellas County · Member since 2016 · 166 posts · 114 votes

5y

Why not a four family?

1 Reply

Jeff HornbergerBusiness Member

Investor · Spokane Valley, WA · Member since 2012 · 45 posts · 42 votes

5y

@Wendell Butler

I house hacked two duplexes before buying a single family home for my family. I’m surprised to hear a duplex would be a break even point. Maybe your rents aren’t as High there. In any case I would stretch for a triplex if I were you. If you dont have kids and it’s easier to do in life now then make the sacrifice before ya do.

I will say if it’s the cost of a triplex that is concerning then try shelling out a little cash and write letters to owners of duplex and triplexes in the areas you prefer. Local title companies should be able to get that list.

Let the cash flow numbers dictate what route you go though.

Best of luck!

[email protected]509-994-5007

Hornberger Property Management4.2286 Reviews

Website View Page

1 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Jeff Hornberger good ideas, and yes here in Worcester the properties are pretty expensive and the rent isn’t quite high enough that in a duplex you can cash flow while you are house hacking (for the most part it seems). With a triplex you can cash flow while house hacking easily here though.

0 Reply

Adam Melon

Rental Property Investor · NY · Member since 2019 · 30 posts · 19 votes

5y

@Wendell Butler Triplex, and make sure you find a bank that will let leverage rental income in the underwriting process with zero landlord experience. Also make sure they allocate 75% of the rental income the units generate. If the units are vacant, they will take the FMV rent rates.

Also be prepared to put something down. Not sure how competitive your market is, but if others are offering 50 100k down, their offers will be more attractive.

You can also go higher on list price than non veterans because you have no PMI expense and also may have a veterans property tax exemption %. But that depends if MA does that. NY does. I get a 15% property tax exemption as a veteran. Would be 50% if you separated with a disability.

Happy to discuss if you have any further questions.

Good luck!

0 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Adam Melon wow did not know about the possible tax exemption, that would be awesome! And yeah it’s seeming I may have to put some money down to get a triplex, which is okay since I’ll have profits from the equity from my condo I fixed up.

So different banks have different criteria regarding the VA loans and potential rental income? I thought VA loans were all the same criteria, but it really depends on the lender you go through correct? I have a year experience as a landlord currently, but not 2 years (which is what VA loans look for I guess). So I'll need to most likely get a triplex with tenants already in place (paperwork and documented) to get the potential rental calculated in.

0 Reply

Taylor Wrice-Brooks

Real Estate Consultant · Washington, DC · Member since 2016 · 39 posts · 17 votes

5y

What are side-by-side duplexes?

---------------------------------------------

Originally posted by @Michael DeLaMarre:

If you can find a side-by-side duplex in Worcester in a nice mostly single-family neighborhood it will rent out for a premium. A remodeled 3BR unit in a triple decker will rent for $1700-$1900/mo but a remodeled 3BR single family house will rent for $2000-$2200/month.

I have a side-by-side duplex in a single family neighborhood and the units rent more like a single family than a triple decker. It seems easier to find duplexes in the better areas of Worcester also, so you might have more to choose from.

0 Reply

Ekamjot Singh

Member since 2019 · 38 posts · 2 votes

5y

@Wendell Butler

sir if you want to refinance your property then look for 5 units apartment as the property which have 5 or more units is considered as commercial property which will make it easy for you to invest in your next property

1 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Ekamjot Singh I can not use a VA loan on commercial property. I am simply looking to get into a duplex/triplex as my first house hack to get started and the ball rolling for my long term rental portfolio.

0 Reply

Wendell ButlerPro Member

OP

Investor · Charlotte, NC · Member since 2020 · 139 posts · 95 votes

5y

@Taylor Wrice-Brooks side by side means that the units are next to each other, rather than a 1st floor unit and second floor unit (up/down duplex).

1 Reply

Jacob Pereira

Real Estate Agent · Austin, TX · Member since 2014 · 636 posts · 486 votes

5y

@Wendell Butler, as a veteran who used his VA on a duplex, I wish I'd started with a fourplex and leveraged to the hilt. My advice is figure out the max you can borrow, and get a property that's close to that.

1 Reply

House Hacking - Duplex or triplex?

House Hacking - Duplex or triplex?

Most Popular Reply

56 Replies