First time investor needing advice

34 Replies

I'm a new investor looking to purchase my first home, we currently live in Raleigh NC. My fiancee and I have about 10k saved up and want to purchase a Duplex and do a house hack. We want to invest in hopefully the Raleigh/Durham area but have been told by multiple people that is a very slim chance we don't mind going outside of this area if that means we can get a duplex. Our goal is to live in the duplex rent out the other half and within a year or two purchase second and a third and so on for homes. We will most likely do a FHA loan but are kind of lost as to the smartest path moving forward. We have between now and late fall to get everything together. Any tips that people might have regarding first home purchases especially house hacking multi family would be wonderful.


Thanks in Advance

-Isaiah

@Isaiah Fariel great strategy. House hacking is the best way to start.

Are you committed to only multi family? There are a few available in Raleigh (not cheap even with 3.5% down FHA) but your options would be much wider if you were open to other ways of house hacking too (roommates, ADU, short term rentals). Something to consider.

@Isaiah Fariel

Welcome to the world of real estate! I’m relatively new myself, so looks like we’ll both be learning a lot from the BP community. Just relocated to Raleigh in September of 2020. Your game plan seems plausible! Wishing you all the best with your efforts 🙏🏼

Best,

CD

@Bryce Platt I am definitively flexible when it comes to starting out. But the reason why I am so interested in multi family is because I will get to be more hands on with living there and being the property manager, doing repairs, dealing with issues and all the different roles possible to get a better understanding of this industry. Thank you for making those suggestions I will look into broadening my options especially because Raleigh is such a hard market to start out in.

@Isaiah Fariel I moved into my house hack last Oct. This is my first property and here's the numbers on it:

Purchase price $260,000

FHA loan 3.5% down $9,100

First time home buyers asistance $7,500

Total down payment needed to close $1,600

$9,100 - $7,500 = $1,600

Monthly mortgage + monthly fees = $1,800

Net monthly income $1,900

Cash flow $100 month 

This is all the numbers on a 3 unit. I provided all of these numbers to show you how powerful an extra unit can be. Just food for thought! Best of luck. 

@Isaiah Fariel

One thing I learned with the FHA is there are limits to the loans depending on the number of units. When I was looking for a triplex in Chicago we could not find anything below the FHA limit. What I wish I knew at the time was there are some lenders that will give you a conventional loan if you put a little bit more down. I've seen down payments on a conventional loan as low as 5%. Something I wish I explored / knew at the time!

@Isaiah Fariel

How much experience do you have in real estate? Are you handy enough to fix regular issues as they arise? Are you interested in doing short term rentals, or would your market support it? The answers to these questions will dictate your plan of action.

Another thing to note with house hacking, obviously the more you can make the better, but the house hack doesn't necessarily need to cashflow. The most important element is for you to get experience as an owner under your belt and to reduce the pressure of making monthly rent payments, but may not eliminate them entirely.

@Alexander Baldwin thats exactly what i'm thinking wanting to have a place to live while also collecting extra income. So far things I've seen have been on market but I am looking to go off market i've gotten creative finding things and i'm going to send a few direct mail to some places I saw.

@Michael K. I don't have any experience in real estate which is why I really want to house hack doing multi family so I can really ht the ground running and learn as much as possible first hand. Ideally i'd like to start out in year long rentals and as I get more comfortable do out of state rentals as well as short term rentals

I just read a realtor dot com article today titled Top 10 Hottest ZIP codes in the U.S. Raleigh, NC made the cut.  Zip code 27604 listed the median list price as $287,950 and the median list price within the city limits: $519,800

Just some additional info.  Keep looking in the area- eventually there will be something.  Best of luck!

@Isaiah Fariel   I struggled to find much of anything on market for awhile. Eventually found one, but there is generally more opportunity off market. 

If I were you, I'd consider putting ~500 towards purchasing a list of every small multifamily property in the area you're looking in and mailing those. 

I've used Listsource and PropStream before and they both work well. You'd get a list of several hundred of these kinds of properties that you could write letters to or even knock on the owner's door. 

Do you have specific zip codes or areas that you're looking at moving into?

Originally posted by @Isaiah Fariel :

I'm a new investor looking to purchase my first home, we currently live in Raleigh NC. My fiancee and I have about 10k saved up and want to purchase a Duplex and do a house hack. We want to invest in hopefully the Raleigh/Durham area but have been told by multiple people that is a very slim chance we don't mind going outside of this area if that means we can get a duplex. Our goal is to live in the duplex rent out the other half and within a year or two purchase second and a third and so on for homes. We will most likely do a FHA loan but are kind of lost as to the smartest path moving forward. We have between now and late fall to get everything together. Any tips that people might have regarding first home purchases especially house hacking multi family would be wonderful.

My recommendation on the way forward is:

Research & understand the FHA loan limits for Raleigh/Durham- Understanding these limits so you can manage expectations

Given the loan limits start researching the pricing of multifamilies in the Raliegh/Durham area. You may want to hire a Real Estate Agent to do this or do it own your own. The objective: Understand what areas you can afford. Regarding the Real Estate agent, considering that you're not going to purchase until the fall you need to manage your own expectations on how much a realtor can help at this point. That realtor will most likely spend more time working with someone who's willing to pull the trigger now versus working with you.

Understand how much rent you can get in the different areas of Raliegh/Durham- Again you can research on your own or hire a realtor. This is a critical to understanding what to expect in house hacking; i.e. will property cash flow while your living in the home or will you have to wait until you move out for it to cash flow. You may find that a duplex isn't enough- You may need to look for a triplex or 4 unit

Start a habit of running business case analysis on properties. Put some of your analysis on Bigger Pockets and get some feedback

Get pre-approved for a loan.




 

@Isaiah Fariel Welcome to BP!!

I think your plan is a fantastic one; however, one thing I'd say is that if you are unable to find a duplex where you are right now, it is totally ok to move to where you can found a duplex is (this is all about sacrifice). 

My wife and I had to do the same exact thing when we started and it worked out just fine for us!

Yes, we had to leave our cosy luxury apartment community with all the amazing amenities and move to our newly purchased duplex in the city, where we could not find parking until we drove around the block a few times. Oh, we had to worry about what trash and recycle days were 😏 and we had to learn how to deal with the inherited tenants (roommates in the top floor) who came with the duplex we just bought. 

In retrospect, I am so glad we went through all that. And I am saying all this to you to quasi prepare for the journey ahead. Remember, it is all about sacrifice now for a better future and it is well worth it!

Oh also, do this when as you looking for your first duplex: https://www.biggerpockets.com/...

@Isaiah Fariel , congrats! I'm a new house hacker too, but I just completed my first purchase. If it helps any, I was unsure if I could afford a duplex in my area of Sacramento. I eventually found a triplex 45 mins away, going for the same rate as duplexes near the city. For me personally, looking outside the city has proven to be a very satisfying choice. The air is cleaner, crime is lower, and I am still within a good commuting distance of my job downtown, for when I need to return physically to the workplace. All the best to you!

Raleigh is pretty saturated... I just moved from Raleigh to Cary. Have you considered looking north or east where the market is growing a bit faster? Wake Forest / Garner are where a lot of people are moving right now which means more construction and more net growth over time

@Isaiah Fariel . My firm works with a lot of investors and I’m investor myself owning 22 rental properties in the triangle. I’m happy to schedule a call to learn more about your goals. We have an office in downtown Wake Forest. Thanks.

Sounds like you have a very good plan but the inventory for Duplexes are pretty low, and the prices are on the high side for all of them that i see hitting the market in Raleigh. If you find one that works for you jump on it but if not don't rule out doing a FHA 203k loan and buying a single family and adding value that way. Then you could possibly build enough equity to take out a Heloc and use that money to buy another property.