Help with purchasing first multi-family home

6 Replies

We are approved for $145K in the central Florida area and have been looking for a multi-family dwelling to purchase.  We have been searching for several months and have been having little to no luck.  We want to do an owner occupied building for our first purchase.  We have been doing some research and are open to any multi-family options but are not sure of our best options given our financial constraints.  We have been looking into duplex homes for our first purchase but wanted to gather some opinions and input from those more experienced. 

First we were wondering if anyone has any insight into multi-family properties in the central Florida area in the $135-145K price range?  And second if anyone has any suggestions into the options for us at this point.  

Thank you in advance for any insight and assistance! 

Ephryn,

Hi! Nice to see you..

One of the best ways a new investor can get started, in my opinion is by purchasing a 4 unit property as their very first purchase.

Volusia County ... Here the county loan limit for a 4 unit property is 530,150. That enables you to buy around 550k with just 3.5% down payment. That's about 20k. The seller can cover the closing costs & escrows. Plus we need to have another 3 months in reserves. Call it 9-12k.. So all together you need about 32k total saved right now.

We live in one unit, and rent out the other 3. In some cases the rents from 3 may be enough to cover the living expense in unit we live in. In most cases, the rental income will make our cost of living in our unit much cheaper than it ever would be if we bought our own condo or single family house.

This is an FHA loan. Typically you can only use FHA one time. Unless you have a really good letter of explanation that details the reasons why you are moving out of your current primary and into a new house using FHA a second time. (Ie. having a baby, moving to other side of town for job, etc.) If the exception is granted, then we get to use FHA twice allowing us to control more real estate with only 3.5% out of our pocket!

Where many investors make a big mistake, is buying single family or condo first... then trying to acquire a 4 unit later. It's much more difficult to convince the underwriter that you are moving out of a comfortable private space , and into a building shared with 3 other families. Then you are stuck putting down 25% to acquire that 4 unit as investment VS the 3.5% FHA as primary residence.

Long story short.. by purchasing the 4 unit as your first property, you're able to acquire, control, and benefit from the appreciation of 4 units with just about 20k down (3.5%) vs about 115k down payment (25%) laters.

How long would it take us to save up 115k? Plus when you buy it investment you also need 6 months cash reserves as well.

@Jim Blackburn A seasoned Real Estate Investor also advised me on the similar approach as a 1st time Home Buyer. If i am going to approach FHA loans, take full advantage of it and purchase a 4 Units (obviously having all your ducks in the row). You having done it recently or in the past, you do advise that it the best approach am i Correct for those that doesn't have 20 -25% to put down as a down payment?

@Ephryn Thompson please be aware that FHA has a self-sufficiency test. If you are going to live in one unit then the other 3 units must meet the self-sufficiency test. You take the other 3 units rental income minus a 25% vacancy factor and that income must be higher than the mortgage payment. You can always look into Freddie's Home Possible program to avoid this test with as little as 5% down and some areas have no income limit.

Thank you for all of your comments!!  We greatly appreciate the advice however we have been approved for only $145K and we cannot afford a 4 unit at this time.  We have been searching for a duplex which would be feasible for us.  We are still planning on doing what you all have suggested and living in one and renting the other. 

Does anyone have any insight into available duplex or multi-family homes in the $145k range? 

@Ephryn Thompson

Are you working with Realtors already?  I would hoop up with a couple good ones and also check out the fsbo sites.

Also, as a first time buyer, multi family with just 3.5% down is best way to go.  Read my post on this thread.

https://www.biggerpockets.com/forums/311/topics/491821-help-with-purchasing-first-multi-family-home

Hello Jim,

Thank you for your comment. My girlfriend and I found and bought property almost two years ago but due to a job promotion we never ended up living there. We have had the duplex rented for almost the complete two years. We took two months to make some needed upgrades. I'm very interested in finding a mentor that could give me some advice that could teach me how I can go from one duplex to more. My finances are limited so I've been researching grants and other methods on how to finance more property but there's a lot to weed through, any advice is welcome.