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'd like to piggy back off of this and ask anyone who's willing to share some information about condo investments to let me know! I live in a state where we don't really do condos.... I've ordered books on condo investing that just arrived I'll be burning through those in the next week, but would love to talk to someone who's doing it and making it work! Thanks!
Hi Stephanie, I am a local (South Florida) Realtor and Investor. I wanted to share my 2 cents as I recently assisted a couple purchase a multi-family with an FHA loan, and even though we had a few hick ups (because of the property) their loan got approved without an issue. This is their 1st property and they are house hacking it, they plan to live there no more than 2 years and then fully rent it out and purchase their second property. Things they did before contacting me where to get pre-approved with a Lender (that understood the FHA requirements for a Multi-family) and save up enough cash for the purchase and repairs. We looked at about 10 properties and fully analyzed the comparables, ROI and potential fully-rented income before submitting contracts until we landed on the right one for them. The property is not located in an ideal living area for them but they are willing to sacrifice that in the short term in order to build their rental portfolio. Having gone through that experience with them and knowing how much they will be cash flowing in the future I can confirm that you're idea to purchase a Multi-family as a 1st investment is an excellent choice.
@Stephanie Sicard Thanks for posting this question. I'm in the process of doing the same thing (buying a multifamily property to house hack). Meeting with my lender helped me decide how much I could offer and if I needed to save more. I know a few others have suggested this as well. Good luck on your process and keep us updated with what you decide to do.
Your Realtor is trying to act in your best interests as unexpected expenses do arise after closing and may cost more than you can afford at this time. However, the call is yours to make.
You can take some steps to protect yourself:
- Shop around for a home warranty provider who will cover all the units and their respective appliances and key things such as the furnace/AC unit. Some home warrant providers offer this, some only cover one unit so shop around.
- Budget for a higher capex / maintenance in the first year and set that money aside for emergencies.
- Vet your tenants - look on the forums here for excellent tenant vetting techniques and stick to them (avoid friends and family).
- Buy in the best neighborhood you can - this helps to ensure an easy resale should you need to exit quickly.
House hacking on an FHA loan can yield amazing cash-on-cash returns and set you up for financial freedom if you start out right. If you rush into it without doing your homework you may end up in difficulty. Protect yourself and do your homework on everything before you make a move!
I would find another Realtor. Maybe one who has experience with small MF properties and can help you problem solve to accomplish your goals. Not change them.
55+ Condo community sounds like you would be cutting your teeth with pudding. Go get a duplex or triplex that needs to paint and some TLC and get after it. You can probably find an investor friendly realtor in your area on this site. Good luck!
How many doors does your realtor have? Starting out is never easy. Down money doesn't come easy. I know this I own a total of one 4 Plex. Working on a duplex right now. You can get low money down with FHA. From listening to BP pod cast condo associations can be a major headache. I'm not a seasoned veteran but I'd jump right in and get the duplex. Tenants stove or fridge goes out move yours into thier side. As newbies we'll have to face some hardships. Just my opinion.
@Stephanie Sicard I own a condo as my primary and it sucks. The HOA stuck us with a huge loan to fix vents improperly installed. Now I have a new $150 bill each month on top of my other HOA fees. Also, I house hacked a duplex, it's a great way to learn to be a land lord.