$1,000,000+ First Property

[Jayden Melo]

Looking to buy a four-plex in the Seattle area as my first rental property. However they all seem to be selling for $1,000,000+. Is that amount too ambitious for a first time investor? I would be living in one of the units and would use 3.5% with an FHA loan for the down payment. Let me know what y'all think, thanks. :)

[Chris Seveney]

@Jayden Melo

This really depends on your experience, level of confidence, net worth and team.

If you have zero real estate experience, never owned a home and are using your life savings to buy this, from a risk perspective this might not be the smartest move. But if you have a great job, plenty of cash reserves, a good team (contractors, potential pm even though living there), then you have reduced the risk.

Also the area that it’s in will play a big roll as well.

What is your confidence level?

[Sergey A. Petrov]

Considering the fact that a $1m single family home is almost the new normal in Seattle, your plans aren’t crazy. And if you owner occupy, self managing makes perfect sense. You’ll just need a good contractor and someone you can call for advice with tenant issues when they come up. Initial setup is equally important- screening criteria and process, rent collection, move-in / out procedures and checklists, etc etc etc.

Are you already prequalified? Started the search?

I am an investor and a licensed real estate broker. Also currently looking for a four plex as well. Can help you with all of the above.

[Upen Patel]

@Jayden Melo The issue you will likely run into for a 3 or 4-unit using FHA is the FHA Self Sufficiency test. FHA doesn't require this for a 2-unit. Property values have gone up, rates have gone up, but rents haven't gone up as much, which results in properties failing especially in high priced cities (DC, NYC, LA, Seattle, etc.).

If you are in the healthcare field, there are special programs that you can take advantage.

Hope this help. Lets me know if you have any questions.

[Natalie Roger]

@Jayden Melo

The answer is of course... it depends. Seven figures for a multifamily property in Seattle is nothing unusual, many single family homes will go for that! 

The more the rents cover your mortgage, the less likely you are to come out of pocket to cover the debt service. A pricey property in a lower rent area is going to have more risk than one in an area that consistently has high rents. 

Would definitely start with talking to an FHA lender, they can give you an idea of what is realistic. I can recommend one, or there are many here on bigger pockets!

[Chris Irvin]

Great job for choosing to Househack! I'm currently HouseHacking in St.Louis and it is working out great. I know that it's not nearly as expensive as your market, but I would also ask about a 5% down non-FHA loan. I was able to get a significantly better interest rate doing this.

Good luck!

[Bradley Dosch]

I don't think it's too ambitious. As others have said, it all depends on your goals and criteria. The price point doesn't change the mechanics of the house hack too much. It's just that the numbers are different. Good luck Jayden!

[Sherief Elbassuoni]

@Jayden Melo, Median sale price is $885K for one unit. A fourplex can easily go more than $1M in Seattle. You will just need to run the numbers. As long as you have cash flow, you are good. That said, with very little money down like 3.5% FHA loan, getting +ve cash flow may not be an easy task

[Alec Stephens]

@Jayden Melo, purchasing a four unit and living in one of the units is a great way to get started. Working with a good real estate agent experienced in investment property will be very helpful. Make sure you understand how much rent is coming in and what the expenses are: maintenance, mortgage...principle and interest (a 15 or 30 year fixed rate would be wise in this environment), taxes and insurance. What is the overall condition of the property? Is there any deferred maintenance? Any large capital expenditures required in the near term (roof, mechanicals, etc)? if so, make sure you have adequate cash reserves to cover (a property with good bones in need of cosmetics can a be great opportunity). What is your goal going in? Are you looking for income or equity creation? Once you understand the property...the financials, condition and the area/neighborhood (typically a lower income neighborhood will cash flow better but not appreciate as well). Is there value to be created? A great rule of thumb is to buy the worst house on the block and make it the best. Are rents at market rate or can you raise them? Can you fix up the units and increase rents. With a multi-unit it's important to consider how every dollar spent will equate to increased rent. How handy are you? (paint is one of the best ways to make cost effective improvements). Have a game plan going in. I have done this and it allowed me to create significant equity that I used to purchase additional real estate. 

[Dave Skow]

@Jayden Melo - thanks - not ambitious if you are willing / able to learn on the fly .....make sure to get fully pre approved for the FHA scenario so that you can 1) make sure you can qualify and 2) become familair with the numbers for payment / cash for closing etc .... good luck

[Julien Jeannot]

Anything is possible and I love the owner occupied multis for first time investors. That's how I got started.

First steps is to talk to an agent and lender to get the lay of the land, set expectations and a strategy.

[Nicholas Coulter]

@Jayden Melo My wife and I started with a rent by the room for the first 2 years and now we are looking to do the same! We are looking for a 1.5 million dollar multi unit in San Diego! If the numbers pencil out and you have multiple exit strategies it could work very well! Make sure to do deep due diligence!

[Carlos Ptriawan]

1 mil for 4plex is so cheap, only $250k per door. This is easy to make money.