Should i buy a house or hold off and i duplex or mulitiplex

Question

New investor here. Currently renting in LA area but been looking for my first house. Should i buy a house for myself to live in or should i hold off and trying to find a duplex or multiplex?

Manolo D. · Answer

@Casey Peterson You have a very unique family according to your profile, here is how I will do it if I were you. First explore if you can have your brother be the RMO of an LLC or Corp or even partnership, if you need it, there are some laws that your brother needs to be here when operating a job, however, just register his address as yours, after 4 years, you can inherit that license, just do a couple of side jobs within those 4 years, just take a business law exam by CSLB. Study about the difference between 4 plex and more than 4 plex, first one can qualify for FHA or in your case, VA assisted loans mostly have 0% down, more than 4 units is normally commercial with 20% down. I know some Vets and they all said that VA loans are really friendly when buying a multiplex, you might want to get a 4 plex and live in 1, in my short knowledge (you need to verify this), the evaluation for self-sufficiency is on the 1st unit will be your qualified income (just like qualifying for a house, I think they only consider 40-45%), then the rents on the other 3 will be added to your qualified income, then the expenses come in and all that. Read posts from Logan Allec about FHA self-sufficiency and that should give you a fair idea on what you will be running into, more or less a very similar scenario.

Gilbert Dominguez · Answer

Always, always, always choose income over equity when that equity is not yet realized.

I would buy a multi unit where your income from the rental units can contribute towards your mortgage payments.

When just getting started safety, and assurance should be foremost on your mind.

Even if you do not realize a gain in equity having rental units will help you make your mortgage payments on time and contribute to you building up good credit which is an underestimated value by many a new comer in real estate investing.

Even if you can afford a single family home do not buy it if it's going to put you out on a limb spending most of what you have or may have coming in.

I always think like this, if I have $10.00 I will consider spending $2.00 and keep $8.00 in reserve. However if I can get 3 people to pitch in $6.00 I will consider spending $4 especially if what I want cost $20.00 the balance to be paid over time because there will then be 4 incomes committed to paying off the balance, directly or indirectly.The buy becomes a leveraged buy and the risks are better spread plus I will get the credit for paying more than I actually did. It may be thought of as a suddle difference since I could claim that rental income is also truly mine but fact is others help me and I still get all the benefits for being the legal owner.

Ciprian L. · Answer

Get a 2-4 unit property, probably you could find a duplex for a price very close to a single family home.

Casey Peterson · Answer

Thanks for the advice, Thats a good article. It was what i was considering, just wanted another opinion.

Kurt K. · Answer

Google house hacking if you buy a MF unit. Its a great way to build equity. Not sure about the laws in CA about living in the residence, but I'm sure its something you can research. Good luck.