Long time lurker and first time poster. I have a finance scenario and am trying to figure out the best way to go about it.
I have a family member that's in need of housing and I'm in search of an investment. We're looking at Duplex options, so one unit would be occupied by a non associated renter.
I know I can just buy the property (20-25% down) or they could buy it (3.5% down FHA) - if we buy it as a partnership (50/50), would it be considered investment or owner occupied? (Since I would be just an investor and they would be owner occupied)
Thank you in advance for your thoughts.
It would probably be investor. Be VERY careful about mixing business and pleasure. I know 20% versus 3.5% is VERY attractive. You should use the search button and see how many discussion of family comes up with people experiencing issues. I manage properties for family but receive NO financial compensation and for me that is the only way I would do it!
Have you thought about moving into a 4plex yourself? If you decide to go with family make sure you have a clear "business" plan and outline of responsibilities.
Thanks for the thoughts and I've been reading some of the family horror stories ... yikes.
In my market 4plexes are considerably out of my price range and not very desirable. This family deal would be in the midwest, while I live in DC.
If you only have the cash to do one deal and you have a family member who needs a primary residence I would recommend looking into owner occupant opportunities. I would recommend starting with a government foreclosure www.hudhomestore.com is where you will find "HUD's" www.homepath.com is where you will find Fanny Mae properties
Owner Occupant Priority aka "exclusive" (hud) aka "first look" (homepath) if you are willing to live in the home for at least one year you get a 15 day head-start ahead of investors. So if the deal of a lifetime pop's up and there is $20,000 in equity all you need to do is live there for a year, refi the home to get the equity or sell after your 1 year is up.... I bought my primary residence 18 months ago as an "exclusive" buyer... Previous sale price $108,000 we bought it for $25,000 with about $1,000 in repairs to make it move in ready.
Liquidity is far easier with a single family home than a multi unit building so if you find out you are not into being a landlord you would be much less likely to lose your shirt.
Thank you for your advice.
It seems like I might be trying to kill two birds with one stone that might best be tackled separately.
Might be best for me to just help my family member by gifting them money for a down payment on a single family home and working a separate investment deal.
I think your conclusion is correct. You can gift the down payment to you family member, but you can still consider a multi unit property. I'm not sure how this works, but you should be able to establish a "joint venture" after the fact. If this is not possible immediately, then surely it's possible after the mandatory one year owner-occupy period.
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