Your first property

9 Replies

Hello all Currently looking at some properties. As a new investor, I️ just wanted to know some of the factors that made you pick a property. For example why did some target single family as opposed to condos or multi families house? Just curious as any tips or perspective will help out Thank you

@Dexter Kubi ,

Multifamily>SFH in terms of cash flow.. focus on multi-family if it's an option for you are you are looking for cash flow! Also, if you're doing rehabs, double or triple your rehab budget, you'll likely find some unwelcome surprises!

If you're buying in cash,  no one will know if you're a seasoned veteran, or complete newbie... ask for a steep discount!    We typically get 25-40% of asking, all because we ask, and it's in cash!

@Linda D. I wish I could get a discount half that good out here :(

But to answer the original question it depends on the type of tenant you want to attract SFR will attract better tenants in most cases but may offer slightly lower returns. I don't like condos for rentals at all, mostly due to high HOA fees and HOA regulations, plus you don't actually own the land just the unit.

I like multi family because the cash flow is better generally.

I think a great way to start is to househack a small multi family property if you can. You can learn the ropes of landlording and save a bunch of money! You also get the same great financing terms of single family or a condo if it’s your first place.

@Dexter Kubi ,

Just to piggie back on @Aaron K. , I would suggest staying away from Condos/Townhouses/anything with a HOA. The HOA makes the rules, and in my experience it's like a little dictatorship! They can do whatever they want, whenever they want, set whatever rules they want... lots of headaches!

One place I lived had a 50% owner occupancy rate, meaning 50% had to to be owner occupied.. so it's kind of a gamble, do other owners live there or not?   My favorite personal example is when my ex got a bill for $1700 to fix the tiny front porch railings, likely $300 in materials at most.. they never asked--- they tell you to jump, and you jump.     Unless you HAVE to do a condo because of cost, I'd never recommend it.  

Aaron had a great point about determining your tenant first.. think about them, what matters most to them?   Schools?  Location?  Low Rent?   Section 8?     Risk vs. Reward, always remember that one too!     The more focused you can be, the more successful and easier it will be for you!     IMO where people have problems, is they make assumptions about what people want, compared to what the market tells you is the truth. 

Thank all, all great advice. I know a couple of multifamily houses in my hometown that I can get for cheap. However, my hometown is very mixed in terms of the clients due to location. What I mean is the more downtown you go, the more crime, problems etc, the more you go near the borders, the more you get families, young professionals, responsible people. Since its my first time with not alot of capital, I have to pick a property that will cash flow pretty soon. Unfortunately, I can't house hack because I already rent a single family house with my girlfriend. I do think a multi would be the way to go as a first property if I can attract the right tenants. My biggest worry is the financing until I actually start the process. Not sure if I can have a bank loan me money for the whole thing + any rehab costs. As you can see, I obviously need to learn more but I do want to take the plunge before next spring.

Hmmmm. I think I would say that SFH vs multifamily is very area-specific. Here in Illinois, I don't see that multifamily (4 or more units - even though MF is 5+, I throw fourplexes in here) cash flows anywhere near as well as houses.

For four plexes or properties with more doors, they typically want 80 to 90k a door or more in my areas. Rents are between 800 to 900/mo. Yet I can buy SFHs for 100k to 110k that get 1400/mo or so. I don't see the cash flow in apartments at all. Not unless you factor in that you're having to put down 80 to 90k for a down payment on a MF - whereas the SFH you can do the BRRR strategy and pull most of your money out so your cash flow looks to be less given the higher leverage.

But I just don't see it here.  

In terms of returns, to me again the returns are far better for sfh's when you use the BRRR strategy and can pull almost all of your money out of the deal.

Lastly, I like SFH's way better than MF because they are far easier to self manage.

But I do have a question for @Linda D, how is your return on SFH not far greater than MF if you're getting those kinds of discounts? :-)

If you are all in at 60% of the ARV (40% discount), then you can do a cash out refi after its stabilized and have no money in the deal and still likely be cash flowing. Thats an infinite return. :-)

Where to start depends on where you are. There are three factors you must consider.  Where you are mentally, how you are situated financially and the physical location of the property.

Our first cost $18,000 plus $7,000 in improvements. It was a 3/1 on a slab in a low cost area. Why? That is what we could afford.  It answered the mindset, finances and location questions.

As our experience grew so did the size of our projects. We escalated to multi family, commercial and even a mobile home park. 

Don't bite off more than you can chew.