Purchasing Duplex/Triplex

8 Replies

Hello all,

I just joined the site and am really grateful for all the insight and information that I have been provided just by lurking.  I am 25 years old and will be graduating from law school next month.  I have no savings and a lot of debt.  But fortunately, I will be taking a job in Pittsburgh making over six figures.

I figured that I could go two ways. I could start paying off my debt aggressively or pay the minimum on my debt and start investing. Investing sounds like a better option. My plan is to aggressively save for the next 9 months and purchase a multi-family house in Pittsburgh. I would live in one side and take an FHA to save additional funds for another purchase/investment.

My question about the first purchase is that I would like to live in a nice area with a nice place.  I would like a place that would cash flow positively when I move out.  But I'd rather live in a nice place and sacrifice some cash flow.  I am just wondering if it is an okay plan to look for a place that I am comfortable in even if some other less expensive options provide better cash flow in an area that I do not want to live or a house that has not been updated enough for my tastes?  

I am really open to learning and have really just thought about real estate investing for the first time a few days ago. Over the next 9 months I plan to read every book out there about REI and hopefully gain a good foundation of learning in this area.

I recommend trying to find a place where you will have to cover 30% or less of your principal, interest, taxes, and insurance. Let your tenants cover that burden.

You may wish to move into the smallest of the units in order to maximize what you can bring in from the other units.

My first place was an owner occupied duplex. At first my tenant covered 85% of the monthly payments. It only got better over time with various improvements and rent increases. I've also been blessed with great tenants.

Now I live elsewhere and that first property is my best for cash flow.

Thank you for the advice!

Welcome to BP, @Andrew Lacy . You are certainly in the right place to learn about Real Estate Investing.

My background is personal finance/financial independence. You didn't mention how much debt you will have upon graduation, but my vote is for a hybrid solution of what you are suggesting. Having all that debt hanging over your head can weigh you down, mentally. If you are making 6 figures, It should be easy to find a place to purchase and live in, while paying down your debt. Live like a college student until the debt is gone, and then continue to live like a college student while investing heavily.

I am a huge supporter of owning your own home. Building equity AND renting out the other side is a super bonus. Living in half of a duplex while renting out the other is called house hacking. Search the BP site and read all you can about it. If you buy smart, you can get the rent on the other side to pay a significant portion of your mortgage payment, possibly even the entire thing.

Also read up on how to run a proper background check on your tenants. A little due diligence in the beginning will save you a HUGE amount of hassle down the road. Since you will be living next door to them, you want to make sure they don't cause you endless headaches.

Your original question was should you compromise your comfort for cash flow. Really, you are the only one who can answer that. You could always buy the duplex and live in one side temporarily while the other side is being remodeled, then move into the nicer side and remodel the remaining one, then rent it out. Or you can move in as is. 

There are lots of Philly agents on BP. Find one who can show you what is out there. Perhaps a couple thousand more initially will get you exactly what you want, and you don't have to compromise very much at all.

Good luck with your search, and let us know how it goes!

Originally posted by @Mindy Jensen :

Welcome to BP, @Andrew Lacy. You are certainly in the right place to learn about Real Estate Investing.

My background is personal finance/financial independence. You didn't mention how much debt you will have upon graduation, but my vote is for a hybrid solution of what you are suggesting. Having all that debt hanging over your head can weigh you down, mentally. If you are making 6 figures, It should be easy to find a place to purchase and live in, while paying down your debt. Live like a college student until the debt is gone, and then continue to live like a college student while investing heavily.

I am a huge supporter of owning your own home. Building equity AND renting out the other side is a super bonus. Living in half of a duplex while renting out the other is called house hacking. Search the BP site and read all you can about it. If you buy smart, you can get the rent on the other side to pay a significant portion of your mortgage payment, possibly even the entire thing.

Also read up on how to run a proper background check on your tenants. A little due diligence in the beginning will save you a HUGE amount of hassle down the road. Since you will be living next door to them, you want to make sure they don't cause you endless headaches.

Your original question was should you compromise your comfort for cash flow. Really, you are the only one who can answer that. You could always buy the duplex and live in one side temporarily while the other side is being remodeled, then move into the nicer side and remodel the remaining one, then rent it out. Or you can move in as is. 

There are lots of Philly agents on BP. Find one who can show you what is out there. Perhaps a couple thousand more initially will get you exactly what you want, and you don't have to compromise very much at all.

Good luck with your search, and let us know how it goes!

 Thank you so much for the advice.  I will have about 100k in debt at graduation while making 140k per year.  I have already signed a lease to rent with friends paying 450 a month in rent plus utilities.  I will be making the minimum loan payments no problem.  But I really want to start building up equity.  

So I figured that I could save and look while educating myself about investing during this time period.  Then after moving into a house that provides both rent and equity I could pay more into my loans while still looking for deals on a second property.  I'm very new to all of this, but have really become excited by what I am reading.  Also, I plan to read up on real estate law and tenant/landlord law.  I will be a lawyer in a few short months so I figured that I can have some of the basics of the law behind this down by time I start to look for my first property.  I plan on starting in March next year to see what is out there and hopefully close by the end of next May.

Originally posted by @Mindy Jensen :

Thanks for the info!  I Definitely do not want to be a real estate agent, but having that license might be helpful. I'll look into it.  

Hi,

I am a realtor in Illinois.

If you look up to a 4 unit building and still be able to get FHA or regular conventional financing. This will help to spread out cost. The big thing will be making sure you can get pre approved with a bank that will work with you. Once you past 4 units you go into commercial financing. Congratulation on graduating and Have fun with investing.

Good Luck.

@Andrew Lacy , You have a very good start to a very good plan.  Like others have said, you will have excellent financing options with 2, 3, or 4 units.  

As far as your desire to live in a nice place, definitely purchase in a location you are comfortable in.  If you do not want to live in a certain location, then you likely will not want to landlord in that area either. If you are diligent in your search, you will be able to find something in a nice area that you want to live in.

It sounds like you are in a good situation where you have a fairly cheap apartment now and can take your time to find that first investment property.  Put together your plan, find a real estate agent that understands your plan, run the numbers on every place you are interested in to see if it fits the plan, stick to your plan, and you will find the one that is right for you. 

Good luck!

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