Thoughts on my start into realestate?

Question

Hello BP community!

I absolutely love reading and learning about realestate. Last, 2-3 years it’s the only thing I read. Every book and podcast has been checked off.

I am finally ready to dive into it, slowly…

I belive I am a buy and hold kinda girl and house hacking is where I will begin.

I’ve went backwards than most I am 45 but now my kids are grown therefore house hacking is do-able.

Honestly I could house hack forever, but I have a boyfriend of 10 years.

Eventually it will be time to make a move together….

Thoughts on my ideas please and thank you SO much!

I would love to start with a fourplex, but I feel that is out of reach for me.

We are considering: (my guy and I)

Each of us buying a duplex. That is owner occupied starting 2025.

I will test (if approved) STR or MTR…on the other unit, but also Besure it works for LTR.

We both have good credit, DTI is way low, great jobs, and money saved to start this process.

Here in Lexington KY I feel it’s hard to find duplex in a decent area unless it’s over $500k.

We each prefer under $300k for a duplex. We prefer 2bedroom 1.5 bath.

We also want to invest here in KY.

A few perks about my guy, he works for a builder, investor. He is Property Manager. We will pick his bosses brain eventually.

I plan to start my process January 2025 on my duplex. My guy will start closer to May 2025 on his.

I should mention my guy owns a primary home already as an inheritance that at this time we have no plans to touch. It’s in a GREAT area and in the future we do have plans for that, but we have an elder family member living there. I would assume we would need to change that to a rental before he starts his duplex process??

That home has $45k balance. At this time we aren’t pulling funds from that home. But we do have that option in year 3 and after.

Other than that we have no debt.

So, any upgrades to our duplexes will be from our cash.

This is our plans for year one and two.

Year one I get a duplex, then again year two. My guy will be doing the same.

Year 3 we plan to make the move together and build (my guy works for a builder so huge discount there)

After year 3 and we are settled and married and living in our home and we would have our duplexes we would love to continue into flipping, or BRRRR maybe one per year…. I would love to find a storage facility for sale one day or even one cabin in TN, but that’s later goals. For now it’s duplexes and our home. Year 1-3.

We have 4 kids all older between the two of us.

Our ultimate goal is retirement and generational wealth.

Each kid will inherit one duplex and we want to teach them as much as possible.

Does this sound like a good plan,

Or am I missing anything?

Buy and hold, and have some cash flow eventually (enough cash flow to continue this journey year 1-2) but definitely appreciation.

If we can’t find duplex is it a bad idea to consider SFH with basement? We would each flip our basements and STR or MTR 1st floor and we would live in our basements of the SFH.

By year 3 we hope to each own 2 duplexes.

I would prefer single family homes I may be wrong but does single family appreciate better than duplexes? But, I also think what if STR or MTR goes good.

I don’t see a family allowing that in their basement. So for now I feel a duplex is best for our goals.

The home with the $45k balance might be our forever home once flipped the way we want it in year 3, but for now it’s occupied by a family member and we don’t want to change that…..

We want to use our cash now for these duplexes and save that for our home in year 3. Then after settled move into other projects each year to pay down debt.

also, from FHA one to two on our duplex we would need to refinance out of that loan, correct? Or I guess the 2nd loan would be conventional? We would like our home year three to be FHA as well.

Jeremy Melloul · Answer

Hey Leah!

Your plan sounds well-thought-out and strategic, with a clear path to building wealth and achieving your goals of retirement and generational wealth. Starting with duplexes and transitioning into single-family homes (SFH), flips, or even commercial investments like a storage facility is a solid approach. Here are a few thoughts and clarifications based on your message:

• Starting with Duplexes: House hacking with a duplex is a great way to start, especially if you plan to live in one unit and rent out the other. It allows you to ease into the real estate market, generate cash flow, and build equity while keeping your living expenses low. Considering STR (short-term rental) or MTR (medium-term rental) is smart, but also being prepared for long-term rentals (LTR) is key since markets and regulations can change.
• Fourplex vs. Duplex: While a fourplex may seem out of reach, focusing on duplexes for now is a sound alternative. If you find a deal that aligns with your budget and goals, don't dismiss single-family homes with basement rental potential either. In fact, a SFH with a rentable basement can be a great stepping stone if duplexes aren't available within your price range.
• Single-Family Homes vs. Duplexes: Single-family homes (SFHs) can appreciate faster in certain markets, but duplexes provide the benefit of immediate rental income from both units. In your case, having cash flow from duplexes might be more important than appreciation, especially if you plan to scale into other projects in the near future. However, duplexes can still appreciate well in the right areas.
• FHA and Loan Strategy:FHA Loan Limitations: You’re correct that FHA loans can only be used for one primary residence at a time. Once you move on to a second property, you’ll likely need to refinance out of the FHA loan to free up that option for a new home purchase or switch to a conventional loan for future properties.Your Home in Year 3: Planning to use an FHA loan for your personal home in Year 3 is possible, but make sure you meet the FHA criteria at that time. Conventional loans for investment properties like the duplexes may be a better option if you’re holding multiple properties.
• FHA Loan Limitations: You’re correct that FHA loans can only be used for one primary residence at a time. Once you move on to a second property, you’ll likely need to refinance out of the FHA loan to free up that option for a new home purchase or switch to a conventional loan for future properties.
• Your Home in Year 3: Planning to use an FHA loan for your personal home in Year 3 is possible, but make sure you meet the FHA criteria at that time. Conventional loans for investment properties like the duplexes may be a better option if you’re holding multiple properties.
• Market Considerations:You’re absolutely right that finding a duplex in Lexington under $300k in a desirable area might be tough, but keep an eye on market trends and perhaps look for off-market deals. With your boyfriend working for a builder/investor, you might have access to some insider opportunities.Working with your boyfriend’s expertise and connections is a huge advantage, especially for managing upgrades and potentially cutting costs on labor or materials.
• You’re absolutely right that finding a duplex in Lexington under $300k in a desirable area might be tough, but keep an eye on market trends and perhaps look for off-market deals. With your boyfriend working for a builder/investor, you might have access to some insider opportunities.
• Working with your boyfriend’s expertise and connections is a huge advantage, especially for managing upgrades and potentially cutting costs on labor or materials.
• The $45K Home: Keeping the inherited property with the $45k balance as-is until Year 3 is a wise decision. Once it’s paid off or remodeled, it could become a fantastic rental property or your forever home, as you mentioned. There’s no rush to pull equity from it until you’re ready.
• Flipping and BRRRR Strategy: Once you’re settled into your duplexes and personal home, moving into flipping or the BRRRR strategy (Buy, Rehab, Rent, Refinance, Repeat) is a logical next step. Given your long-term goals of retirement and teaching your kids, these strategies can help you build even more equity and cash flow over time.
• Retirement and Generational Wealth: It's fantastic that you're thinking ahead about teaching your kids and creating generational wealth. Having them each inherit a duplex is a powerful way to set them up for financial success while maintaining cash flow for your future retirement.

• FHA Loan Limitations: You’re correct that FHA loans can only be used for one primary residence at a time. Once you move on to a second property, you’ll likely need to refinance out of the FHA loan to free up that option for a new home purchase or switch to a conventional loan for future properties.
• Your Home in Year 3: Planning to use an FHA loan for your personal home in Year 3 is possible, but make sure you meet the FHA criteria at that time. Conventional loans for investment properties like the duplexes may be a better option if you’re holding multiple properties.

• You’re absolutely right that finding a duplex in Lexington under $300k in a desirable area might be tough, but keep an eye on market trends and perhaps look for off-market deals. With your boyfriend working for a builder/investor, you might have access to some insider opportunities.
• Working with your boyfriend’s expertise and connections is a huge advantage, especially for managing upgrades and potentially cutting costs on labor or materials.

Overall, your plan is ambitious but entirely achievable. Just keep an eye on your financing options, the local market trends, and stay flexible if the right deals arise, whether they’re duplexes, SFHs, or other opportunities.

Michael Smythe · Answer

sounds like a good plan, but would get a HELOC on your guy's current primary - FOR EMERGENCY PURPOSES ONLY!

Very difficult and more expensive to get a HELOC on a rental.

James Wilcox · Answer

@Leah Ramsey Sounds like a great plan! I'd love to chat more about how we can make this a reality and discuss some key considerations specific to the central KY market based on what you have posted. As an investor-focused agent, I have a solid reputation in this area. Feel free to send me a DM, and we can get things moving. I'll be attending BPCon24 soon, so I will be MIA for a bit, we could set up a call for later next week.

Riley Poppell · Answer

Hey Leah, when it comes time to refinance you can as long as you qualify for a conventional loan with a credit score of 620 or higher and have 5% – 25% equity in the home. If you have 20% equity, you may also be able to remove your mortgage insurance and lower your monthly payment in the process. You cannot typically have more than one FHA at a time but yeah you can buy back in if your credit score is adequate and your budget can handle the cost of a second mortgage. To transfer a primary residence to a rental property and qualify for an FHA loan on a new home, you generally need to have at least 25% equity in your current home.

Leah Ramsey · Answer

Thank you both for your replies!

When it comes time to refinance out of FHA is that hard to do? And then can I buy right back into FHA after 1st duplex loan is transferred.

Also what is needed for him to transfer his primary to a rental so he can also apply for FHA?

Wale Lawal · Answer

@Leah Ramsey

Duplexes can be a cost-effective investment strategy for reducing living costs and generating income. They can be used for short-term rentals (STR) and medium-term rentals (MTR), with long-term rentals as a backup. FHA loans are required for each property, and refinancing is essential for future purchases. Duplexes can be scaled over years 1-3, with future expansion options like flipping, BRRRR, storage, and cabins. Investing in property management and staying informed about local regulations are essential.

Good luck!

Thoughts on my start into realestate?

Thoughts on my start into realestate?

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