Looking for owner occupied investment property as a first time home buyer

[Tarek Soliman]

Hello!

I’m looking for a small multi-unit investment property (2–4 units) where I can put about 5% down with a conventional loan and have the rental income cover the full mortgage. Ideally, the property’s gross rents would be at least 1.2× the monthly mortgage payment to account for taxes, insurance, maintenance, and vacancies. For example, on a $400,000 purchase with 5% down, the loan would be about $380,000, with an estimated all-in mortgage of roughly $2,800–$3,000 per month. I’m targeting properties where total monthly rents are around $3,500–$4,000+, so the property pays for itself and potentially leaves positive cash flow, even if I live in one unit or keep reserves. My goal is stability first, cash flow second, and long-term appreciation.

are those numbers realistic? Which market match these types of deals? Any recommendations for lenders/realtors who would help reach my goals? 

Thanks 

[Rick Albert]

Let's put it this way, if the numbers work at 5% down, why wouldn't an investor who is putting 20%-30% not only buy it but likely can pay more? It's generally not realistic in this market but to be fair it also depends on where.

The only way you might be able to pull it off is if you find value add deals. In your case, you will want to add bedrooms and/or units. Maybe you buy a fourplex that are all 2 beds but have dining rooms to make them 3 bed units and then rent by the room (so now you are managing 12 "units"). You are going to have to get more creative to get closer to your goals.

I would also factor in the other benefits of homeownership other than cash flow. I have some investor clients who also factor in loan buy down, as that is a built in savings account, appreciation, and tax benefits. When I buy properties, I try to break even on all costs knowing I have these other benefits since I still have my main job helping clients buy and sell.

In terms of location, be careful when asking for realtors' recommendations. You are going to get responses that state their market is best but could really be going after a sale. Think about the lifestyle you want and what you currently do for work. Because at the end of the day owning is generally better than renting. So even if you are paying a little out of pocket, you would be paying rent anyways but this has more benefits.

Good luck!