Should I go big or go small for first muti family investment?

5 Replies

Hi everyone I am a inspiring real estate investor. And I am looking to take advantage of the fha loan program. I'm 22 from Pittsburgh Pa and have about 10k saved up. I have about a year and a half left before I'm at my 2 year mark at my current job and am able to apply for an fha loan. I'm also in the process of looking for a second job to help increase my monthly savings so when the time comes I will have more money to invest with and also have a higher monthly income to hopefully allow me to get a bigger property. The main question I have is for my first investment property should I try and get a bigger 3-4 unit or just a normal duplex? I am hoping to get my second property as soon as possible after I get my first and don't know which route I should take to get my first. Also if someone would be able to explain to me the steps of aquiring my second rental property. Like would I have to put at least 20% cash down since I'm planning on using fha loan for my first? Or would I be able to leverage my first property to get a second? I'm sorry if I seems as if I am talking in circles, I'm new to the whole real estate thing and still have a lot to learn so bare with me. I'm looking forward to gaining valuable information from anyone who is willing to help. 

You always need to start with the end in mind when your building your investment portfolio. There are a lot of different factor to consider but i'm a "jump in with both feet kind of guy" so I say go with the 3-4 plex. You will learn more faster and get the best use of your FHA loan. Let me know if I can help you out anymore.

@Ryan Howard  

It is a great that you are so young and ready to jump into the game at your age! You said you have 6 months on the job..... Do you have a 2 year history in the line of work that you have or did you attend college (2 years) For this line of work? Both of these count towards your two year history..... So you may even be able to purchase soon! 10k is a great savings for FHA. You can ask the seller to pay up to 6% of closing costs and out only 3.5% down keeping as much capital for the reserve requirements and repairs.

Here is a link on conventional financing, that you should hopefully find helpful for the second purchase. 

http://www.biggerpockets.com/blogs/5110/blog_posts...

@Ryan Howard , I agree with Jerry. Great suggestion to look into FHA products. Educating your self on the private money world will only help. If not for this deal for the next. Take your time for the first one to be right. You especially want to make sure that first is a good buy, able to kickstart your investing career to the next.

Best of luck,

Josh

worry more about equity, ROI, and cash flow than size of unit. At your age, be patient & remember that you make your money on real estate when you buy, not when you sell (and hopefully every month when you collect rent.)

Having equity in your first will accelerate your ability to buy the second, third, etc. Patience, but not too much patience. 

If you're thinking about your exit strategy as @Josh Nix suggests, then in my opinion a duplex should be slightly easier to sell in the end than a 3-4 unit. It seems the greater the number of units, the fewer buyers.