How soon do I buy my second multi family?

Question

Hi everyone,

My name is Ricardo Taveras I am 28 years old  and I am new to the BP.  I am about to close on my first multi family in Dover, NH, which I utilized my VA loan to purchase I will be living in one unit. I want to hit the ground running and purchase another investment property.

The question I have are:

Should I wait 6 -12 months to get an understanding of being a landlord?

How much would I need to put down for a conventional loan if I were to occupy on of the units?

How soon did you purchase your second invesment property?

I will have 100k in my savings after closing on first property my not including my retirement funds.

Thank you!

Ricardo T. · Answer

@Daniel Sager thank you Daniel! I appreciate the insight. I def want my next multi family to be on the bigger side 3-4 units.

Daniel Sager · Answer

@Ricardo Taveras

Grats sir! I agree with the others; buy as soon as you can and are comfortable doing so. I am in a very similar situation as you. Current 4plex which I purchased in the fall is on an FHA and I am about to close on a duplex which is being financed on a 7/1 ARM portfolio loan.

In my opinion, going conventional for a 4plex is a tough call because you have to put down so much $, you may as well save up a little more and get a commercial property...which is exactly what I plan to do next.

Dallon Schultz · Answer

@Ricardo Taveras our first two purchases were maybe 2-3 months apart. I'm sure you've already experienced it but once you catch the multifamily bug you don't want to stop purchasing. Once you close on your current property you'll feel excited and accomplished but will immediately want to buy the next one. Nothing wrong with it as long as your analyzing the properties properly and not getting in over your head.

Ricardo T. · Answer

@Ujwal Velagapudi thank you for the info! I definitely agree with you, we’re in weird times right now. I need to see how the next couple months play out. I would like to move forward with another unit around the December timeframe.

Ujwal Velagapudi · Answer

Hey @Ricardo Taveras congrats on closing your first soon! I would say 25% down would be common, depending on the lender you could get 20% as well. If you get a residential loan on a 2-4 unit, you could get away with 5% (or 3.5 w/FHA) if you occupy it as your personal residence.

I purchased my second about just over 4 months after my first. I was actually just looking over my old emails and realized I had another apartment building under contract within days of getting my first property under contract, but unfortunately it didn't close due to a fire. I was looking at a few different deals and had them all in the pipeline. If I had more money, I would've definitely grabbed a few more, but I also had zero idea about managing properties at the time.

I was just very aggressive early on, and wanted to buy everything I could that made sense on paper and checked out physically, but those were different times. Today, I think it would help to feel out your property, get an understanding of managing your tenants, maintenance, etc. especially as situations are definitely different around us today. But at the same time definitely keep your eye out, never stop getting a sense for the market, and if you do see something you like you can make the move.

Ricardo T. · Answer

@Karl B. Awesome man thank you for the insight! I was afraid I was getting ahead of my self! I definitely want to wait maybe 3 to 4 months (December time frame) to pull the trigger and make sure I find something where the numbers work. I want my next property to be a 3 or 4 unit.

Thank you for the information best of luck with everything!

Karl B. · Answer

Hello. I purchased my first multi-family in December of 2016 (4-plex). Months later I came across a duplex I liked around April or May of 2017 and gave them a low ball offer which they declined. And then around late-June they came back to me and asked if my offer was still good, which it was.

And so one can look for another property whenever they'd like. Landlording isn't tough and you'll get the hang of it after a few months. Many people who buy their first property are cash poor afterwards and have to save up for the next property but since you've got the funds you might as well look for more - just make certain you're getting a deal where the numbers make sense.

You can get a FHA loan at 3.5% down. If you can find a 4-unit with good numbers that's the way to go - live in a unit and have the other three units pay the mortgage. Then after a year move out and rent your unit out for even more rent coming in. (Though some markets don't have a lot of 4-units - if that's the case look for what's available whether 2-3 unit)