Hi, my name is Justin, I am debating on what a better investment would be. (in general) Buying a Multi unit property 3-5 Units (50-100k$) and living in one of them, This way I can use a fha loan with 3.5 % down as a first time homebuyer. Or I could buy a single family home or duplex for (20-40k$) and put a full 20% down payment. With these price ranges I would be able to cover the mortgage comfortably with my full time job. These examples are in the inner city. I appreciate any knowledge shared. Thank you
I'm not familiar with your area but if this is your first property, you might not want to manage 3-4 tenants right off the bat. I would definitely take advantage of the FHA financing while you can. You could split the difference and look for a nicer duplex maybe 40-70k and rent one side. Just have to play with the numbers and figure out what price point works best for you.
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Consider checking out HUD homes for small multi's owner occupied gets first crack.
You might consider Niche or Specialized Housing like student housing. Rents can be 2-4 times more. Remember you don't have to own a property to control it.
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Strictly from the investment perspective of your question, if you can have your mortgage paid by tenants and get into the house with 3.5% down, you're leveraging your initial cash investment more effectively - you're controlling a $100k investment for a $3500 outlay vs. a $20k investment for the same upfront cost - and someone else is paying all or most of the ongoing expenses.
But, this assumes all other things being equal. What repairs will be needed for each property? You may be able to ignore repairs on your own personal SFH while you have to take care of them for your rental units. What is your time worth when it comes to managing the other units and tenants? Even good tenants can be a headache and literally keep you up at night. What happens if/when you have a vacant unit or two vacant units?
If you have not yet talked details with a few lenders, I would start there. Multi can have special treatment. It would be a shame to find a great property and not be able to get the financing you expected.
That said, I would target a triplex. Spreads the risks more but still manageable for a newbie. Think through how you would get by if one or both were not paying for a few months.
thanks to all who replied. As far as worst case scenario no tenant completely vacant Etc. I would still be able to afford mortgage etc. That is why I'm am considering this price range. I am still learning as much as I can and saving for a good 8 months before I would make any purchases. I never like to rush into things plus I would like to get my fiancé on the same page with me. Although i t will be me taking the financial risk. I would also like to find out utility costs repairs Etc so I don't have any suprises. As far as my time I am a truck driver and work 10 hrs a day second shift so free time is scarce but I'm willing to invest my time as well as money into this. Again I appreciate your time and helping a newbie.
Just wanted to chime in because I was in the same boat as you a few months ago and just closed on my first duplex. I did the FHA 3.5% down and it worked out really well but there were a few extra costs I wasn't expecting right off the bat so just wanted to make sure you're considering closing costs (mine were about 6K cash out of pocket not including the 3.5% that I had to put down). Also ask about mortgage insurance when you meet with a lender. If you put down anything less than 20% you'll have to pay it every month. Good luck!!!
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