I am new to Real Estate but have been doing equations on properties since I was around 14 years old. Every since we took a family vacation to Myrtle Beach, South Carolina; my Dad explained to me how this worked it really amazed me. I am a bit obsessed with finding properties and doing math to see my cash flow and how quick I could pay off a mortgage. Anyway I am now 20 years old with a steady job, I have been saving my money for 3 years and will graduate college this May. I am looking to purchase my first property before this upcoming summer and have a few questions hopefully I can get insight on.
1. How do you know the property will be rented? Single families scare me, I foresee them being tougher to rent for some reason. There must be a risk, but I see these single families as being more risky as I see them open for renters much more often then a multi family unit.
2. Is it allowed to use an FHA loan and have tenants live in your home with in the first year? I have heard of people doing this, which seems illegal to me.
3. Good or bad idea to buy first rental property off of the MLS? I see cap rates between 8 and 11 percent on most.
Hi Kyle, and welcome to Bigger Pockets! You've become a part of the most informative website in Real Estate. I bought my first property at 21 years old. It was a single family in Ewing, NJ which is currently rented out to college students. You find as you look around and get to know the markets that some areas are in high demand of rentals and others are simply not. There are a bunch of variables that go into the equation. Far more variables than I would be able to explain to you over this brief post.
To answer your question about renting out a property that you purchased using an FHA loan...Typically, an FHA loan requires you to live in the property for at least 1 year. But, if you purchase a 2-family with an FHA loan, most-likely you will be able to live in one side and rent out the second unit.
To answer your third question... What I've learned is that you can find better deals that aren't marketed to the public. Think outside the box... 8-11% cap rates can easily turn into 3-4% caps rates if you dont carefully calculate maintenance, closing costs, interest rates, etc. Be sure to put a lot of time into calculating the cap rate (especially if this is your first deal).
Feel free to PM me if you have any questions.
Best of luck,
I agree with Mike regarding FHA purchases.
Single Family homes tend to take longer to rent in part to the generally higher rent, the level of maintenance, and the fact that individuals paying that amount of rent can often affort mortgage payments.
My girlfriend and I work asa team. She's a real estate investor here in Myrtle Beach and I'm a real estate agent (Beach & Forest Realty). We have bought apartment buildings and townhouses and between the two I prefer townhouses. They are easy to rent and they tend to appreciate well. also, They qualify for FHA lending. Apartments generally increase in value as the rents increase. This can take a considerable amount of time. But both townhouses and apartments are easy to rent here. I usually place one ad on Craigslist and get inundated with calls.
If you're considering the Myrtle Beach area please contact me. I know the rental market here very well and I would be happy to help you get started.