Rental Property Investor · Hallandale Beach, FL · Member since 2019 · 33 posts · 24 votes
I'm getting ready to buy my first rental property within the next 2-3 months . I have 13k saved up and I intend to use an FHA loan.
The multi family properties in my area are about 300,000+ for a 2/1 duplex . I found a realtor and he advised that it would not be safe to get a multi family just yet . He said having only 13k would be spreading myself too thin because things could break right after I buy and it could be difficult if both stoves broke for example .
He advised that I should start off with a condo that was 115,000 in a 55+ community , which I could rent for 1600 and get a feel of land -lording . If something broke , it would not be as expensive versus if something broke in both units of a duplex . He thinks I should get a few properties under my built before I buy a multi family .
My original dream and strategy was to get a multi family as my first investment . But I also am aware that if a strategy can’t work for the moment , another strategy can . I feel a little unsure on what step to take . What do you guys think ?
@Stephanie Sicard I cannot disagree more. If you buy a condo in a 55+ community, you have your mortgage, HOAs, and limited renter pool. On top of what happens when condo association decides no more renters, or limits the number of units that can be rented. Finally, with one condo, you only have one source of income. If tenant moves out, your mortgage, insurance, taxes and HOA are still due.
Yes, a duplex means you have 2 stoves, 2 fridges, etc to repair, but that will be part of your inspection period. The key is understanding those risks and budgeting for it. This is like any other business. But with a 2 family, you have one mortgage and two people paying into it. When someone moves out, you still have at least a little bit, if not all, of your mortgage covered. You also have only 1 roof, one set of gutters, etc.
I will say, having only $13k saved is a little thin, depending on how much you need to use for down payment. I try to keep about $5k in reserves for my 2 family at any time, but a lot of the mechanicals are less than 10 years old, as are appliances, etc. My roof is the next project.
I think the point about go big or go home and getting support for that is the issue. I see you are a pm. Thus you should have some experience and if that is the case you should feel more comfortable with going the multi family route as I have.
I just dont like when people tell other people to do something that is risky with little thinking of an exit plan if the people that are planning on doing it have never done it before. It assumes that the new person has the same risk tolerance and is willing to put up with the same risk tolerance or stress or part time job that they do which might not be the case. I am in the Baltimore market which is probably harder than Florida however I'm sure there are still high cash flow low entry high risk properties though a lesser percentage. Some people can deal with it and as a pm maybe you already know but there are a lot of people who will invest based on price and it becomes a nightmare. There are others and that just hate being a landlord after a while. It sounds great at first but when they have to rely on the tenants to pay and the tenants start paying late the fact they dont pay every month by the 5th is enough to make the landlord throw in the towel. That doesnt factor in all the repairs everyone is talking about.
Being a pm you should have a better understanding than many newbies and even intermediate investors on the variable expenses if you have been a full time residential pm for a few years but they can break many people not involved in this that underestimate things. Obviously a thorough inspection can void some initial maintenance but 13k won't go that far.
This is a crawl before walk walk before run business. If someone house hacks a single family they can get a good feel for things. If they hate it they can sell it which is much easier as there is more market than a multi family.
Im not saying never go multi family unless you are already comfortable with variable expenses and landlording which you might already be from your job. Just know what you are getting into before committing too much.
I'm getting ready to buy my first rental property within the next 2-3 months . I have 13k saved up and I intend to use an FHA loan.
The multi family properties in my area are about 300,000+ for a 2/1 duplex . I found a realtor and he advised that it would not be safe to get a multi family just yet . He said having only 13k would be spreading myself too thin because things could break right after I buy and it could be difficult if both stoves broke for example .
He advised that I should start off with a condo that was 115,000 in a 55+ community , which I could rent for 1600 and get a feel of land -lording . If something broke , it would not be as expensive versus if something broke in both units of a duplex . He thinks I should get a few properties under my built before I buy a multi family .
My original dream and strategy was to get a multi family as my first investment . But I also am aware that if a strategy can’t work for the moment , another strategy can . I feel a little unsure on what step to take . What do you guys think ?
Thanks for all the advice in advance .
I agree with your real estate agent that $13K is not enough cash for a $300K duplex.
Unless you're doing house hacking - live in one unit and rent out the other, investment properties will require 20% downpayment - which is $60K. In addition to the downpayment, the bank will require you have some cash left over - usually 6 months of mortgage payments set aside (this is part of their liquidity requirements).
Let's say you need $1500/mo of mortgage payments, you need $69K for a $300K duplex that does not need any work or deferred maintenance.
So your options are:
1. Buy a cheaper property
2. Save up or earn $69K first
3. Learn how to acquire properties with no money down - send me a PM and I will send you a training video about that topic
Hi Stephanie! My husband and I are new to investing and our first property we bought last October was a 5-plex. You can absolutely start with a multifamily. Like other above me said, we felt multifamily helped to mitigate our risks because since we have 5 units if a 1 or 2 are vacant we still have enough rental revenue to cover our expenses. From crunching the numbers on other deals, we also found that we are able to cash flow much better. All that aside, we are in an area that we were able to get 5 units for much cheaper than 300K so of course it will depend what you can afford. We also both work full-time and have 2 little ones so we have our property managed and there's more than enough cushion for that and we aren't the ones dealing with the tenants.
@Stephanie Sicard do you have any experience with property management to any degree? I do see where your realtor is coming from and of course they are looking out for your best interest as they should. I jumped right into being a landlord in with a multi family home and not look back since but also that’s how I tend to do things, educate myself as much as they possibly can and then take the leap and figure things out on the way down. 
I'm getting ready to buy my first rental property within the next 2-3 months . I have 13k saved up and I intend to use an FHA loan.
The multi family properties in my area are about 300,000+ for a 2/1 duplex . I found a realtor and he advised that it would not be safe to get a multi family just yet . He said having only 13k would be spreading myself too thin because things could break right after I buy and it could be difficult if both stoves broke for example .
He advised that I should start off with a condo that was 115,000 in a 55+ community , which I could rent for 1600 and get a feel of land -lording . If something broke , it would not be as expensive versus if something broke in both units of a duplex . He thinks I should get a few properties under my built before I buy a multi family .
My original dream and strategy was to get a multi family as my first investment . But I also am aware that if a strategy can’t work for the moment , another strategy can . I feel a little unsure on what step to take . What do you guys think ?
Thanks for all the advice in advance .
I would save up a bit more first if I were you, unless you have a really good job and can afford the expense of upkeep.
I really wish people that invest based on the 2% rule d grade properties and think they are getting good pm and its all going well wait atleast 2 or 3 years before making statements of their success. Let the law of averages even out before they start making claims. I think many on here will find the 50% rule is a combination of the 30% rule for people that get class a and b rentals and the people in the d grade properties averaging around 70% if not more. Maybe a couple years in they can share all their pm stories. Especially if they take over as a pm because the reliable pms quit and they can't find someone else. Than they will also have all the extra info on evictions, shootings, squatters, used syringes, muggings, etc. They will have stories then. I'll give them that.
I agree with @Evan Polaski. I live in a coop in NYC and invest in a duplex in New Orleans. Living in an HOA situation may be more affordable, but risky IMO, because you have no control over the property. Its run by the Board or bylaws and I have run into some major bank/refi issues on top of assessments and maintenance increases. I have more flexibility with my duplex in NOLA. It offers me a long term tenant and an Airbnb and I make profit every year, but even when there are little to no airbnb bookings during the slow months, the tenant carries the majority of the mortgage so the cost is very low to float. Did I slam down some money to get it up and running? Yes, but it needed some work and it's been a great investment since. I'm now looking into Atlanta to perhaps relocate, but very new to this area. Seems walkability and traffic might be an issue for me since I'll be living there. I'm ready for a yard with my 2 dogs, but need a bit of city life close by. Still searching!
If it’s gonna take you a year to give some padding and you’ll be unable to manage a major replacement, your realtor has a point. You don’t want to be in a situation where you’re hoping everything goes perfectly smooth every month. You need some reserves for the things you don’t plan for. Quick vacancy, major repair, or other costly inconvenience could cause major problems if you don’t have some padding. you can definitely start with multi family but be weary of the people telling you to jump right in with no contingency plan. We all want to invest and growth but you got to be smart about it to be successful
@Stephanie Sicard Good morning. It's up to you and how much research you have done in the area and have done dealing with both types of investment properties. Also have in mind the cost of fixing the properties up. As far as applicance's breaking there are ones you can get that are smaller than normal size for cheaper, or used ones that are in great condition. I do like cheaper deals because you can break even sooner and make more profit most of the time.
@Stephanie Sicard first off, congratulations on being so close to your goal. I do not think there is anything wrong with opting for a multifamily property as your first investment. Check out this article I ran into. It talks about why multifamily as a first investment is actually a great idea and why more and more people go this route.
You want a realtor that represents (your) best interests. Let's look at the numbers.
116k SFH
Down payment w/ closing cost(ish)
$6000
Monthly income
$1600
Monthly expenses on 3.5% down 4% interest rate.
$535 mortgage
$1000 for personal place to live
Net $65
300k MFH
Down payment w/ closing cost
$14000
Monthly income
$1400
Monthly expenses
$1383
Net
$17
However with that MFH if you ever move your earning potential goes up like crazy, and you can kwwp close tabs on them tenants if you need to. Obviously these are napkin numbers but you get the jist of it. Best of luck!!!!
@Stephanie Sicard I bought my first duplex in Ft.Worth last fall with about 14k cash. I paid 200k for the property. What I did is during the option period I made sure everything was in tip top shape. The only thing that needs work is the foundation which will be 2k to 3k to fix. I was able to convince the seller to pay most of the closing costs and take a few thousand off the price for the foundation. Anyway I only had to pay $7500 at closing. I also got a prorated rent check and security deposit from tenants that already lived there at closing.
I vote for multi-family instead of a condo. You actually have less risk with multiple sources of income with a multi as others have stated. Run your numbers with both scenarios and you'll see a multi wins.
@Emanuel Ohunwu Wow ! Thanks for sharing . It’s really encouraging hearing other people’s experience doing what I’m trying to do now . I hope I can find a deal like that !
Hi @Stephanie Sicard. While I am not a real estate investor, so I cannot speak as an expert on the topic, it seems to me if your strategy is to start with a multifamily property you shouldn't let anyone talk you out of it. If you understand / recognize your "why" and educate yourself enough on your "how", you can absolutely start with multifamily.
@Stephanie Sicard I have a few thoughts. While I understand what your agent is saying, If you feel that you want to do a duplex, while giving advice is ok, I'm not sure he should try to talk you into, or out of, anything. I think you have a few good options on the table. Home owning is always expensive, things are going to break, you'll need to do repairs and so on, so having a good reserve is always important. Number 1, no matter what property you get, do you due diligence. Even if you have to pay a little extra for certain inspections, do it. The few hundred dollars you are going to spend to confirm everything is good is far cheaper than the hundreds or thousands you could pay in the end. Number 2, I think house hacking may work out great for you. Since you are doing an FHA loan and you'll be living in the house, you could always start off by doing a 3 bedroom style house, get 2 roommates that essentially pay your mortgage while you are saving up. This is a great way to start because not only are you living very cheaply or for free in some cases, it is also giving you the knowledge and skills on how to be a landlord and deal with issues as they arise. Once you save up some more money, I would then go into a multi family. Rent out the room you were living in, move into the multifamily, and rent out the other units. This way the original house be your rental house, and you'll have your multifamily that you can rent out and live in .
It’s so interesting to hear everyone's thoughts on this. My plan is also to invest in multi-family from the get-go but, in saying that, I’m also willing to take a slightly bigger risk to scale quicker. I’m glad I found a realtor who understands my goals and is willing to be creative. Thanks for the input everyone.
Sounds like you have a great outlook. I vote multifamily over condo if you can make the numbers work! Own your whole property and create your own upside.
Just wanted to add one thought that has not been discussed much - immediate vacancy. For either option, be sure you have a real sense of whether or not you will be able to get a tenant in ASAP/keep existing tenants. If you need time to renovate or it is a slow rental market, factor those months' mortgage payments into your equation. Two+ months of vacancy can be dangerous if you have no cushion left after closing.