House hack a duplex or get a VRBO -- first investment

12 Replies

My wife and I just moved here from Arizona and we moved to invest in real estate we now live in Missouri and are wondering if we should buy a duplex in the Columbia Jefferson City area or go for a short-term rental is like Airbnb around lake of the Ozarks. We need help on we need help deciding on what our first investment property will be.

That's tough. 

I think for your first property you should get the duplex. You can free in one side and maybe still cashflow a little. Live in it the required time and buy another with a low fha loan.

You can also rent out both sides if you have no intention of living there but you would have to put down a larger down payment.

You will learn some of the ropes about owning rental property before jumping into the STR game.

@Dan Froilan

The lake Ozark Realestate market is super hot right now, inventory is so low most properties are going for far above ask price with multiple offers and under contract in hours not days. That’s not to say there aren’t good opportunities here, if you are putting on appreciation this is a great time to buy. If you are looking for a long-term cash flowing rental the numbers are really tight. Jefferson City has a completely different demographic and there is plenty of properties to buy there. I would say your long-term goals will determine where are you should invest.

Read posts by him ^^^ Luke Carl, Michael Baum and Julie McCoy for advice and encouragement.  Read my old posts for horror stories and discouragement.

@Dan Froilan get the duplex and Airbnb the unit you don’t live in. Once you move out, the duplex will make you twice the income and depending on the city regulations you can Airbnb both units.

Lake of the ozarks is a tough market to join right now from what I’ve read. The properties are going for very high dollar. I’ve been looking into other lakes nearby.

@Dan Froilan I live in Columbia but have properties both here and The Lake. I would agree with what others are saying, that the lake is in a strange place right now and prices are through the roof. I bought a condo last year and the value has gone up probably 40% since. I’m not sure I would buy there right now unless you were able to find an off market deal that actually made sense.

Columbia is nearing The Lake in price increases as well though. Most duplexes that hit the market are much higher price to income than in the past if they are in a desirable area. My network is fairly large and I have been able to find off markets that make sense both for myself and my investors. Feel free to send me a message and I can try to help you find something in the areas you would prefer.

House hacking is one of the best ways to get started in REI and I think a small multi family will serve you better long term than a STR. That duplex could be your foundation on which you build your real estate investing business.

Hey @Dan Froilan , I agree with @John Underwood . The duplex makes more sense to me as a hack. Once you get that rolling, it will provide you with some revenue to buy your next hack/home. Then you can look at a vacation rental.

I love the idea of house hacking a duplex. Seems like a great solution to get started.

@Dan Froilan I was in the same situation and decided to go with the duplex.

Happy I did because the city I live in (Denver) has implemented new laws that make it difficult to rent short term rentals. The city doesn't like them, neighborhoods don't like em. If you get a bad neighbor they can make your live a living hell.

That being said, my father owns a couple short term rentals in Como, CO and does very well. Short term rentals require much more TLC. A TON of TLC. You are dependant on good reviews and have to hold lots of hands. They can be VERY profitable, but they are a JOB.

I'm wanted more of a "passive" route myself.

Good luck to you!!!

@Dan Froilan I don’t know the market there, I’m Los Angeles based, but depends. Are you paying rent- if so how much? Do you need cash flow and which calculation is going to bring more?

Vacation rentals can be cash cows allowing you to grow faster but one thing to consider is STR income won't be considered income for 2 years for the purpose of refi (this is starting to loosen but talk with your lender)

If you are planning to live in the duplex you will probably get a great rate and it’s easier to refi but won’t be cash flowing as much

In my experience long term rentals appreciate more but cash flow less.

Also do you need to use a management company or can you do it yourself? Str management companies take up to 30% of revenue where you can probably manage a duplex yourself to start. I am a big advocate to manage your vacation properties yourself if you can but it’s more time consuming for sure.

Let me know if you have questions

@Chelsea Mastin

Interesting to hear your dad's had success in Como. We work with a lot of people looking for a second home in Denver or a second home in Colorado Springs and a lot of them do Airbnb or short-term rentals when they're not here. (You've got to buy in the particular cities or counties near these areas that actually allow Airbnb investment properties, but it's totally doable.) I hadn't heard of anyone doing it well in Como. That's good to know for the future. 

I think it really comes down to cash flow, either option can be great. I agree with one of the posts above that the lake is so hot that it's hard to get a place for a price that would cash flow well on the overnight rental market. I also think there is a lot of competition around that area for the overnight rental market, that's basically everyone's plan who buys a property there. I would be interested in overnight rentals around Branson... they're putting world class golf resorts all over that area, it's going to be a major golf destination

I think why do one or the other, why not do both? Buy a small MF and then rent it out at first to get your feet wet, and then once you get the hang of it, and if your market supports that location making a good STR. You could even try renting out your unit first to get the hang of things, while you go somewhere else or vacation (I have a neighbor that does this all the time while she travels for business.) That way you don't have to risk the extra capital on furnishing and marketing the property, as you'll have most of that done already (who doesn't have a few good photos of their home and doing a video takes just an afternoon after cleaning day! :)

The best STRs though are homes with a GH, and this is also a very easy way to keep some seperation from your renters on your first house hack. They also tend to be nicer places that you'd want to live in, or if you like the tiny home/minimalist living you can live in the smaller unit and rent out the main house or unit for more $.

Lots of options to fit your needs, just have to get a bit more creative on this first one out and you can do both.