Best options to focus on for 1st FHA house hack / MTR
New to Real Estate · WA · Member since 2021 · 10 posts · 4 votes
Best options to focus on for 1st FHA house hack / MTR
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Remington LymanBusiness Member
Real Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votesQuote from @Cody M Byre:
I know that I should be close to hospitals and potentially OSU. I could use help narrowing my focus to what is more likely to be successful.
-What is the minimum class of neighborhood I should consider?
-I was planning on getting a MF. Is SF worth considering? (I can borrow 350k for MF but only 275k for SF).
-Am I likely to be more profitable with a beautiful duplex in a super nice neighborhood, or a 3-4 unit in a mediocre neighborhood?
If there are any other considerations I haven't thought of, please share. Thanks!
I think you are overanalyzing your first house hack. When I bought my first property I had zero clue what I was doing. I never even thought about real estate investing.
Just find a 1-4 unit anywhere you feel comfortable living and FHA it. Worry about getting a great deal on your 3rd or 4th deal
13 Replies
- Member since 2020 · 7 posts · 2 votes3y
What's the minimum-class neighborhood that you'd feel comfortable living in? I wouldn't buy anywhere I'm not comfortable living. Also keep in mind generally the nicer the neighborhood the less issues you are likely to have with tenants.
MF/SF- The problem with single-family is you're living in it and the first time you go to buy house # 2, you won't have any income to show for buying a house even if you're renting it out by the room (collecting border income). They don't consider what they call "border income" as money you can use to qualify for your next mortgage. So, definitely multifamily for the win here.
Duplex vs 3/4 unit profitability all depends on the numbers. Are you buying a duplex for $150k or a 4 unit for 400k? The difference in the mortgage alone and how much you can make on rent will give you an idea of which would be better. If both are the same price, always buy more doors. Learn to run the numbers. Brandon Turner did a great video about figuring out rental profitability on YouTube. It's an old Bigger Pockets episode.
I would suggest looking on FurnishedFinder.com and seeing where they locate their medium-term rentals to give you a better idea of where to look for a property. You'll be able to see what is working on there.
- 3yJames CarlsonPro MemberReal Estate Agent · Colorado | stan.store/JamesCarlson · Member since 2014 · 2k+ posts · 2k+ votes
I like the advice of buy a medium-term rental where you'd want to live. I don't think there are easy answers to your other questions, though. Just run your numbers. Does a duplex in a super nice neighborhood perform well? How about a quadplex in a less-nice neighborhood? Then factor in non-financial factors, like what you feel comfortable owning.
I'll say, we own a few midterm rentals in Denver and Colorado Springs, and we focused more on general location than near-a-hospital location. That's for two reasons:
1. Sure, traveling nurses want to be close enough to their job, but they also tend to be youngish people who have chosen a traveling job and likely want to experience the town, so being close to "stuff" is equally important.
2. Traveling nurses are far from your only tenant pool. Nowadays, remote workers, new divorcees, those displaced by a remodel ... all are potential tenants for your medium term rental, so I wouldn't put yourself in a box by only being close to a hospital.
Also, you might check out some of Erin Spradlin's books on the midterm space -- Guide to Midterm Rentals and My First Rental Property Workbook, to name two.
- New to Real Estate · WA · Member since 2021 · 10 posts · 4 votes3y
Quote from @Taylor Dean:
Duplex vs 3/4 unit profitability all depends on the numbers. Are you buying a duplex for $150k or a 4 unit for 400k? The difference in the mortgage alone and how much you can make on rent will give you an idea of which would be better.
Overall great points and very helpful, thanks! As for the ^above^, the point I'm trying to get at is if having fewer doors in a significantly nicer neighborhood is a worthwhile tradeoff when trying to do a strategy besides LTR. It is easy to run the LTR numbers and decide off of that, but if I'm going after MTR, STR, student housing, or some other strategy to greatly boost cash flow, I'm curious how much of a difference the neighborhood makes and how to quantify that (again, not by LTR numbers). Rent coming from 3 units (4plex) instead of 1 (duplex) sounds way better on the surface, but if I'm trying to do MTR or similar, I don't want to be stuck with tons of vacancies.
My concern comes from David Greene and other top investors consistently warning against C class neighborhoods. Really I just want to ensure my first house hack is a successful one, especially in the long term.
- Member since 2020 · 7 posts · 2 votes3y
If you're going to do MTR, STR, student rentals, ect, you have to run the numbers on all of them in an A+ neighborhood vs a C neighborhood. You won't like this, but it's really all about running the numbers no matter the location. Do yourself a favor and start doing deal analyzing exercises. Analyze at least five deals daily and run the numbers as STR, MTR, LTR, and student housing. Do this for a month or two, and I promise you will know your area better and have a better idea of what works there. Make a spreadsheet to make this easy, and keep doing this. This is how you'll learn. There's no simple x is the solution here. The deal matters the most here upfront. If you can get a great deal and buy equity upfront, then you're best off no matter what neighborhood you're in. So, if you can get a property for $100k and rent for $1,500/mo vs a $300k property that can rent for $2,500/mo. You must do all the math to determine which one is the better deal in the end.
Have you qualified for a mortgage yet in WA? I would say that step one is to see how much you can borrow before you seek where you can buy. Your budget will dictate where you can buy.
- New to Real Estate · WA · Member since 2021 · 10 posts · 4 votes3y
I'm qualified for 250k on SF and 350k on MF. Not looking in my location though because it's not a great market to house hack, looking in Columbus, OH.
I'm guessing there is no easy answer to this, but where might I find the numbers to run for MTR, student housing, and rent by the room? Is it fine to just go by a conservative multiple for each? I've heard 2x for STR, 1.5x for MTR. I know running the numbers is simple for LTR. I want to be accurate, yet work quickly when comparing these other strategies' earning potential too.
- Member since 2020 · 7 posts · 2 votes3y
Could you make sure you qualify for money in that location? Lending is location-dependent with the licenses that the banks have. Not all are licensed to lend in all 50 states.
For research for MTR use FurnishedFinder and AirBnB and get the comps there. For student housing, look for housing as if you're a student and go with the numbers that you find, and rent by the room. You can find prices on AirBNB, Craigslist, and in Facebook groups for rooms for rent. That's where to get the monthly rental amount from. Here is the newest video from Bigger Pockets on how to run the numbers.
https://store.biggerpockets.com/products/30-day-stay
This is the book on how to MTR.
- New to Real Estate · WA · Member since 2021 · 10 posts · 4 votes3y
Yes, I'm qualified for Columbus, OH.
I'll set up a spreadsheet and get a range of #'s for those strategies. I've read that book and highly recommend it also, but it's been a while since I finished it so it isn't fresh in my mind.
Thanks
- Lender · Seattle, WA · Member since 2014 · 2k+ posts · 899 votes3y
@Cody M Byre- thanks - where would you like to live? make sure you are fully approved and understand the differences for the loan between a 2plex and a 3-4 plex ( there are a few) .....keep your eyes open for the best opportunty so that you arent narrowing down the options
- 3yRemington LymanBusiness MemberReal Estate Agent · Columbus, OH · Member since 2017 · 6k+ posts · 7k+ votes
Quote from @Cody M Byre:
I know that I should be close to hospitals and potentially OSU. I could use help narrowing my focus to what is more likely to be successful.
-What is the minimum class of neighborhood I should consider?
-I was planning on getting a MF. Is SF worth considering? (I can borrow 350k for MF but only 275k for SF).
-Am I likely to be more profitable with a beautiful duplex in a super nice neighborhood, or a 3-4 unit in a mediocre neighborhood?
If there are any other considerations I haven't thought of, please share. Thanks!
I think you are overanalyzing your first house hack. When I bought my first property I had zero clue what I was doing. I never even thought about real estate investing.
Just find a 1-4 unit anywhere you feel comfortable living and FHA it. Worry about getting a great deal on your 3rd or 4th deal
- 3yDan GuentherBusiness MemberReal Estate Agent · Longmont, CO · Member since 2019 · 548 posts · 271 votes
Hey @Cody M Byre - here's a great tool for researching demand in a given market.
https://www.furnishedfinder.com/stats
The stats page on furnishedfinder.com will let you put in the city and then give you the number of searches or housing requests plus the number of property listing page visits in that are for the last 12 months.
Denver for example:
Map Searches and Housing Requests for the Denver area (last 12 months): 327,125
Map and Property Listing Page Views for the Denver area (last 12 months): 1,997,673While this is one of the many steps you should take to analyze an area, it can be a quick way to determine if it's even worth it to continue doing further research.
Reach out if there is anything I can do to help you out on the journey and good luck to you!
Ten Ridge Realty LLC514 Reviews - Real Estate Agent · Columbus | Toledo · Member since 2019 · 607 posts · 768 votes3y
Quote from @Cody M Byre:
I know that I should be close to hospitals and potentially OSU. I could use help narrowing my focus to what is more likely to be successful.
-What is the minimum class of neighborhood I should consider?
-I was planning on getting a MF. Is SF worth considering? (I can borrow 350k for MF but only 275k for SF).
-Am I likely to be more profitable with a beautiful duplex in a super nice neighborhood, or a 3-4 unit in a mediocre neighborhood?
If there are any other considerations I haven't thought of, please share. Thanks!
You would cashflow better with more units in a “mediocre” area, since taxes and purchase price is generally lower. Those are good price points for the Columbus market.
- New to Real Estate · WA · Member since 2021 · 10 posts · 4 votes3yI understand this is true and obvious for LTR strategy. I'm more interested in comparing higher cash-flow strategies such as MTR in nicer neighborhoods to LTR in worse neighborhoods, specifically in Columbus. Currently leaning towards B- and nicer because I'm more interested in long term wealth than just cash flow. Also I have to occupy it, and want to be proud of the product I'm offering to tenants.
Quote from @Anthony L Amos Jr:
You would cashflow better with more units in a “mediocre” area, since taxes and purchase price is generally lower. Those are good price points for the Columbus market.
- Real Estate Agent · Columbus, OH · Member since 2020 · 44 posts · 36 votes3y
Quote from @Remington Lyman:
Quote from @Cody M Byre:
I know that I should be close to hospitals and potentially OSU. I could use help narrowing my focus to what is more likely to be successful.
-What is the minimum class of neighborhood I should consider?
-I was planning on getting a MF. Is SF worth considering? (I can borrow 350k for MF but only 275k for SF).
-Am I likely to be more profitable with a beautiful duplex in a super nice neighborhood, or a 3-4 unit in a mediocre neighborhood?
If there are any other considerations I haven't thought of, please share. Thanks!
I think you are overanalyzing your first house hack. When I bought my first property I had zero clue what I was doing. I never even thought about real estate investing.
Just find a 1-4 unit anywhere you feel comfortable living and FHA it. Worry about getting a great deal on your 3rd or 4th deal
I think Remington nailed it on the head. As far as class of neighborhood it is really going to come to what you would feel comfortable in. I personally think in Columbus you can get a great C- or C class MF or SF and the numbers will pencil out with the increase of development in Columbus over the medium term time frame. I am an agent that specializes in central Ohio(Mainly Columbus) so let me know if you have any more detailed questions! I hope this helps!
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