First Deal decisions!

6 Replies

Afternoon BP! My name is Ron and I'm from the Columbus Ohio area. I have a question on a first deal would you recommend a single family or multifamily as a first deal? Any information is welcomed! Appreciate it!!

Hey Ron

I agree with Antoine but just to add if you do go for a MFH you could house hack in one and rent the other side. That would give you a good experience on being a landlord by self managing the property. Lots of good luck on your decision.

Cheers!

Ron, I think the answer you are looking for is going to depend on what your overall strategy is. If you are new to real estate investing and you need a place to live, I think house-hacking a small multi family property is the best thing you could do. Since you haven't racked up a bunch of conventional loans, you will be able to take advantage of owner-occupied financing for 1-4 units. This will give you a tremendous advantage because your cash flow will be a lot better than a non owner-occupied investor purchasing the same property on a 15 year am at 5+% interest rate. Also, you will be able to live for free as the other units should ideally cover your mortgage payment. 

Alternatively, if you do not need a new place to live then perhaps you should be looking at single family rentals. Especially if you live in an area where single family properties experience high appreciation, accumulating multiple single family properties may be the best overall strategy. For me, in Oklahoma, we do not experience high appreciation rates and for that reason I have chosen to leave the single family rental game in my past and begin to focus exclusively on multi family deals. When it is all said and done, it takes as much work (I actually think it takes less work) to purchase a 24-unit apartment deal than to accumulate 24 individual single family rental properties. Additionally, a package of 24 single family properties will more than likely be scattered all over the city and county and the time and effort it takes to manage that portfolio could be extensively more involved than an apartment complex where all 24-units are in one location. 

If this is your first deal ever, I would recommend staying in the 1-4 unit range and working your way up to the big boys. The analysis of large multi-family properties is completely different than a single family rental. Large multi family properties are considered a business and the valuation is based entirely on the income that is produced and not other "comps" in the area like single family properties. 

My recommendation would be to start with a single family rental or a 2-4 unit multi family to gain some experience. With that being said, I am one of those people with massive goals and I would hate for anyone to tell me to start small or that I am not ready for a bigger deal. If you want to go ahead and shoot for the big boys, I would just recommend partnering with someone who has experience with those larger deals. Hope this helps, good luck! 

I am constantly hearing that we should all "buy multi family" and while there is some truth in that i think many folks dont know or comprehend the reality of owning and managing anything over 3 or 4 units.  while there are pluses there are several very large minuses that if you are not aware of and ready to take them on will suck all of the joy out of your multi family dream.  Please be careful and dont just buy a multi family because they say you should make sure and talk to someone who has been there for a few years before you jump in.  

Originally posted by @Ron Wayne :

Afternoon BP! My name is Ron and I'm from the Columbus Ohio area. I have a question on a first deal would you recommend a single family or multifamily as a first deal? Any information is welcomed! Appreciate it!!

 Hi Ron, Its not always the case but most multifamily/commercial agents have done residential at some point in the past.  So in order to get the best information and cover the most ground, working with a multifamily agent is my suggestion.  Hope this helps. 

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