Just bought my first multifamily rental- how can I buy another?!
Hi guys,
I am new investor that has been following Bigger Pockets and everyone that is talking real estate investing for the past 2 years. With that said, just this past May 2022 I have finally closed on my first rental property. I am NYC native (Brooklyn.- to be exact) and Newark prices offered a better entry as a first time home buyer for a multi-family home. I have bought a 2 family home of which my husband and I are house-hacking in the ground level apartment while we plan to Airbnb the entire 1st and 2nd units totaling 6 bedrooms and 4 bathrooms. We plan to cash flow well -as we've ran the rental calculators close to a few hundred times (lol) and is getting ready to launch to host guests in our home after about 2 months of getting funding to furnish and prepare the home. Now that we are going to launch, looking at the up-and-coming developments happening in Newark (it has the same energy as Brooklyn over 10 years ago) with many real estate investment opportunities, I would like to get information on how to start with a second rental and work on the strategies on financing my 2nd property.
Any thoughts and suggestions. I would love to hear your feedback. Thanks in advance.
@Dondy Desir-Gutt Congrats on closing on your first property! How did you fund this purchase? cash, fha, conventional? this is an important factor in making a suggestion on how to finance the next property.
@Sebastian Hernandez Hi there and thanks! The property was funded with a FHA load- so low money down.
@Benjamin Aaker Thanks for the detailed response. I have been considering a HELOC- although with interest rates on the rise, does that mean the home line of credit interest would be higher and would it affect my current mortgage rate? Fortunately, before closing I have locked a mortgage rate at 3.5% right before interest rates started to rise.I would hate to raise my current home mortgage interest rate at this point. But if that rate only applies to the HELOC, then that is a method that can be worked as long as the numbers factors into cashflow-ing on the 2nd property.
Make sure that if go the HELOC route, you would still have an appropriate DTI to qualify for a second purchase- after taking out the HELOC. Definitely consult with more than one lender about this. Another option you have is to buy a single family home for low money down conventional. Perhaps a fix and flip or value add in some capacity will be a worthwhile return for your goals; especially because of the financing options that are more available to you with single family.
Quote from @Dondy Desir-Gutt:
@Benjamin Aaker Thanks for the detailed response. I have been considering a HELOC- although with interest rates on the rise, does that mean the home line of credit interest would be higher and would it affect my current mortgage rate? Fortunately, before closing I have locked a mortgage rate at 3.5% right before interest rates started to rise.I would hate to raise my current home mortgage interest rate at this point. But if that rate only applies to the HELOC, then that is a method that can be worked as long as the numbers factors into cashflow-ing on the 2nd property.
The HELOC won't affect your current mortgage. The HELOC will have a higher rate now that the Fed funds rate is increased. HELOCs are usually variable interest rates, but you can lock in a certain maximum increase amount. Make sure that your second property can cash flow while paying the HELOC back and you should be good to go.
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BRRRR could be a great strategy if you are up for it (and can use hard money for the purchase), that way if all goes well, you can get 100% of your capital back fairly shortly and keep expanding
