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Rusty Shafer
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New rental investor needing advice

Rusty Shafer
Posted

I’ve done flips before and now looking to get into rentals. What would y’all suggest be my first purchase? Duplex? Triplex?

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Seth Teel
  • Investor
  • San Antonio, TX
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596
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Seth Teel
  • Investor
  • San Antonio, TX
Replied

I'd definitely suggest a small multi-family (2 - 4 units) for several reasons.

  • 1) Can be purchased with a conforming loan
  • 2) Ability to house hack (if desired)
  • 3) Vacancies don't decimate cash flow
  • 4) Potential net cash flow higher than that of SFR
  • Some important things to think about.  San Antonio does not have a large housing stock of true 2 - 4 unit buildings.  Many are large single-family to multi-family conversions.  An even greater amount are un-permitted multi-unit buildings that are comprised of series of shoddy additions.  You'll want to make sure that each unit has an electric meter.  Typically water won't be individually metered on these types of properties (too costly due to impact fees).  
  • You will also want to make sure that the property is zoned properly.  Even if the house was built 100 years ago as a duplex, if it's currently zoned single-family (R-4, R-5, R-6, etc.) you have a non-conforming use and may have issues with lender underwriting, as well as the city citing you for the non-conforming use.   You can work with the City to get approval for a non-conforming use without going through the re-zone or variance processes, but there is no guarantee they'll approve it.  Unfortunately, we've seen a bunch of wholesalers and noob agents, pushing for a sale, fail to mention (or understand) the issues of improper zoning. 
  • Good luck with your search. Holler if you have any questions. 
  • Seth Teel
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