Detroit, MI · Member since 2018 · 12 posts · 7 votes
Hello BiggerPockets Friends,
My name is Tom and I’ve followed these forums and BiggerPockets podcasts for a couple of years now, it’s almost time for me to make a big decision. I was hoping I could get some advice from some of the wise investors here.
So essentially I am going to sell my first property. Once all is said and done, I will have roughly 200K in savings. I have great credit, but only 6 months of landlord experience. This has lead me to a dilemma. Should I purchase a couple of duplexes and put a hefty down payment on each, which I can surely qualify for? Or should I try and purchase a 6-10 unit?
For years buying a small multi-unit was and is my goal. But I’m not sure if my limited experience would binder my chances of obtaining a commercial loan.
Thanks for any help, and Im excited to develop some constructive friendships here!
Tom
Rental Property Investor · Johnson City TN · Member since 2016 · 386 posts · 271 votes
7y
@Tom I. - Or should I try and purchase a 6-10 unit? For years buying a small multi-unit was and is my goal.
Go for your goal! If you use a property manager than lending should be fine, if you're self managing you may get some push back. Don't think that commercial lending is more difficult, it's just different.
Commercial Mortgages 101 by Michael Reinhard is a great book that breaks it down.
Rental Property Investor · Johnson City TN · Member since 2016 · 386 posts · 271 votes
7y
@Tom I. - Or should I try and purchase a 6-10 unit? For years buying a small multi-unit was and is my goal.
Go for your goal! If you use a property manager than lending should be fine, if you're self managing you may get some push back. Don't think that commercial lending is more difficult, it's just different.
Commercial Mortgages 101 by Michael Reinhard is a great book that breaks it down.
Investor · Shelton, WA · Member since 2017 · 6k+ posts · 6k+ votes
7y
@Tom I. investors make (and lose) money on all segments of REI-no rights and no wrongs. Look at your goals and then decide. Economies of scale are scant with only a door or two; but singles and doubles are generally easier to buy and sell.
I have duplexes and a 12 unit-the return is way better on the 12. Wish I could find another; but have not seen one at a price I am willing to pay.
If your goal is to get into small multi-unit then why wait? The only thing to keep in mind is it may be a bit easier to sell a duplex than a 6-10 unit since only investors will be looking to purchase those. That being said, you can much easier control the value of the property by driving the NOI. Duplexes will only be valued by a market comp approach.
Why not go for the 10 unit and make sure the deal works with a property manager in place, then a lot of your risk will be mitigated
Detroit, MI · Member since 2018 · 12 posts · 7 votes
7y
@Chase Louderback
Thanks, Chase. I would much rather prefer a small multiunit for the above stated reasons and some etc
My main concern was with financing the loan. Though I can afford a 25-30% down payment, it seems like many who purchase multiunits have residential landlord experience. I hope that won’t prevent me from securing a loan for a property I want.
Real Estate Agent · Luray, VA · Member since 2016 · 460 posts · 293 votes
7y
@Tom I. Absolutely. I would recommend finding an experienced property manager in your market and leaning on their experience. If you have a solid business plan and can show your lender that you also have an experienced property manager on your team then that should help.