How do I get started with multiunit investments?

Question

Hello,

Loking in to purchasing my first property, ever. I am in the Houston area and would like to purchase a duplex. I am a teacher so I am looking to take advantage of some of the DPA programs. I am also looking to house hack, rent one and live in the other. I am not finding many options in the area so I have also searched in and around San Antonio,  Austin and Dallas. The affordable duplexes that I have seen are in rougher areas, some of which are slowly developing. I believe the homes I've seen will rent easily and at a good price.  What has been your experience? Should I begin with a less than ideal location and neighborhood?

Jonathan Greene · Answer

This is some of the worst advice I've ever seen in my life here. If you are a teacher and looking to use low-money down loans (which is great for a house hack, no complaints there) you should not spend one second trying to look for off-market properties. You are not a seasoned investor and you don't have cash and there are a million investors targeting Houston areas for cash buys. This would waste all of your free time. The market is tight, find a good investor-friendly realtor who has house hacked themselves and knows where the trending markets are. A first-time buyer and busy teacher should not buy off-market as you won't be protected as you will be in an on-market transaction with representation. Connect with @Jamie Pagay if you need help near Humble or The Woodlands.

Jared Hottle · Answer

I would not begin with a less than ideal location unless you have strong beliefs it is targeted for redevelopment. If I were you I would drive for dollars or get a county lists of all duplexes and begin contacting owners seeing if they will sell. Tell them your story, that you are a teacher and want to live in one side and rent the other. I believe that is compelling and there will be people that want to help you.

Evan Polaski · Answer

@Jamila Sandy, thank you @Jonathan Greene.  I was wondering if the above posters either don't value their time, or don't factor in all these marketing costs against just paying more for a property.  Good investors sourcing off market deals are spending thousands per month in marketing.

Not to say a deal wouldn't fall in you lap, Jamila, but it is very unlikely, let alone you would need to engage an attorney to write the contract, be comfortable in your ability to diagnose high ticket items in a quick manner, likely pay all cash (which you mention not wanting or potentially being able to do), etc.  Off market is a bad idea.

Area selection is relative.  For a house hack, you need to live there, so I would let that be the driving factor.  When I bought my first house, I WANTED to live in a couple neighborhoods that I couldn't afford, so I did step down, but still in an area that I was comfortable.  My wife walked the dog alone at night, no break-ins, etc, but not as "nice" as I would have liked, which really means houses weren't as big and didn't have two car garages.

Nathaniel Ziomek · Answer

Thanks @Jonathan Greene & @Evan Polaski for your insight, looking to take advantage of a similar strategy as @Jamila Sandy in the San Antonio area, house hack in a decent neighborhood.I have heard that finding a turnkey property with a casita (or ADU) is a good place to start in this market as far as this goes, for affordability's sake.

Mike D'Arrigo · Answer

@Jamila Sandy unless you are absolutely certain that the area is undergoing gentrification, I would avoid buying in a rough area. That's usually a recipe for disaster. Don't just take someone's word that the area is gentrifying. Look for objective signs. Do you see a lot of construction and improvement going on? Do you see owner occupants moving in to the area? Are new businesses investing in the area? If you don't see any of these things, I would be very cautious.

Andrew Freed · Answer

@Jamila Sandy - I would highly recommend not purchasing a duplex in a bad area. When purchasing real estate, location is one of the most important factors to take into account. You can improve a property all you want, but moving it can be a lot more challenging.

In regards to finding properties, I agree with everyone's sentiments. Download propstream or deal machine and start developing a list. Cold call or hire a VA on Fivrr or Upwork to call leads for you and follow up with the hot ones yourself. You can also hire a company to write handwritten letters for you to send out to these leads. Open letter marketing does a decent job.

At the end of the day, you're only going to get the deals if you put in the sweat equity. Fighting for the two or three nice duplex's on the MLS against 30 other offers may score you a deal, but you will overpay.

Adam Lacey · Answer

Hi @Jamila Sandy, I agree with @Jared Hottle's idea of trying to find an off-market property. Sending out mailers and cold-calling owners is a great way to find small multifamily. If you can't kind the contact information through the county/city, there are services that can help.

Wale Lawal · Answer

I suggest that you clearly define what you want, do some research, and go from there.  A local Investor-Agent can help shorten your learning curve and save you a lot of headaches as they tend to understand the market better.

Jonathan Greene · Answer

@Nathaniel Ziomek you are falling into a trap as well. Is having an ADU excellent? Yes. Do many have them? No. I wouldn't focus just on that. It's like people looking for seller financing only. You are looking for a needle in a haystack. Everyone wants an extra unit so a turnkey property with an extra unit is going to sell at a premium. If you found a house that had room for an ADU and the regulations were ADU-friendly, that might make more sense since there are so many tiny home/ADU companies that can build for cheap now.

Bud Gaffney · Answer

Live in1 unit, have the tenants help with the bills.

How do I get started with multiunit investments?

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