Chattanooga First Time Buyer

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Chattanooga First Time Buyer

Coty Dowell
Investor · Chattanooga, TN · Member since 2016 · 19 posts · 8 votes

Hi BP community,

I am looking to connect and get some guidance from the BP family here.  I'm a recent college graduate with minimal cash on hand for the moment.  I have a plan, but does anyone have any suggestions on executing my first deal differently?

My plan: I have been actively looking and visiting properties for sale in the Chattanooga, TN area. More specifically, I'm looking for a du-, tri-, or quad-plex. I was thinking of using an FHA loan with a THDA assistance program for the down payment. I will be staying in one unit while renting out the other unit(s). If possible, I will also be renting out the extra bedroom (if there is one) in the unit I will be occupying.

My questions: To learn the ways of land lording, does anyone suggest doing a du-, tri-, or quad-plex over the other? Should I stick with a SFH and house hack the extra bedrooms? Would you suggest the FHA route to financing, or would you go a different route for creative financing?

Any and all help is greatly appreciated!

Coty Dowell

1Reply
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Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
10y

If you invest with less than 20% down, you're taking on additional risk. You will also need money for a rehab, so I would not recommend investing in anything without having at least 25% of the purchase price in cash.  Even if you can buy with no money down, I would not recommend it.  If problems happen, you'll have no buffer of cash to fix it.

The "no money down" is something real estate sales people with no experience sell newbies.  It doesn't really exist.  Even if you are able to buy a house with "no money down", if you have a problem and no way to fix it, you're headed to foreclosure and another 7 years until your credit score is back up so you can obtain financing again. 

Instead, ready "Richest Man in Babylon" and "How I Turned $1,000 into a Million in Real Estate in My Spare Time" (the original version by William Nickerson), and begin putting together a definite conservative plan to build a real estate investment business with low risk of having to declare bankruptcy.  Anything worthwhile requires patience and hard work. There are no shortcuts.  Accept that, then do what you must to get what you want.

You seem to still be at step 1 my friend.  Try to get to step 2, then step 3.

1. Don't know what you don't know (high-risk)

2. Know what you don't know (lower-risk) 

3. Know/experienced a little (medium-risk) 


Finally, work on these pieces so you are able and willing to take action.

All human endeavors are accomplished with...

Definite plans (a clear plan from here to there) + Faith (knowing you can) + Emotion (feeling you can) + Action (taking action) = Achievement of anything

3Reply
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7 Replies

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  • Josh Braun
    Investor · Nashville & Chattanooga, TN · Member since 2015 · 182 posts · 138 votes
    10y

    I'm a huge fan of going the quadplex route, as that is the max multi-family unit you can have to still qualify it as your primary residence. Then once it has past the qualification time period, convert it over to an investment property and do the same thing over and over again. Additionally, I like the lower down payment with FHA/THDA, especially if you have 3 other people paying down the note. Just make sure it cash flows.

    1Reply
  • Coty Dowell
    OP
    Investor · Chattanooga, TN · Member since 2016 · 19 posts · 8 votes
    10y

    @Josh Braun Thank you!  This is very helpful. 

    1Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    10y
    Originally posted by @Coty Dowell:

    Hi BP community,

    I am looking to connect and get some guidance from the BP family here.  I'm a recent college graduate with minimal cash on hand for the moment.  I have a plan, but does anyone have any suggestions on executing my first deal differently?

    My plan: I have been actively looking and visiting properties for sale in the Chattanooga, TN area. More specifically, I'm looking for a du-, tri-, or quad-plex. I was thinking of using an FHA loan with a THDA assistance program for the down payment. I will be staying in one unit while renting out the other unit(s). If possible, I will also be renting out the extra bedroom (if there is one) in the unit I will be occupying.

    My questions: To learn the ways of land lording, does anyone suggest doing a du-, tri-, or quad-plex over the other? Should I stick with a SFH and house hack the extra bedrooms? Would you suggest the FHA route to financing, or would you go a different route for creative financing?

    Any and all help is greatly appreciated!

    Coty Dowell

    No. Start out with a single family rental or maybe a duplex. If duplex, only invest in duplexes that are located in single family residential neighborhoods, (no duplex-hoods). Most developers develop duplexes, triplexs, and fourplexes in neighborhoods with only these types of properties. This means that all people will be renters and trash the property. In addition, your ability to attract a decent quality tenant will be significantly diminished versus a SFR in a good neighborhood.

    When going from SFR to MF, there is a tradeoff you're making. The tradeoff is tenant quality (SFR) for scale (MF). With duplexes, triplexes, fourplexes or anything else up to 60 units, you obtain neither benefit (tenant quality nor scale).

    0Reply
  • Coty Dowell
    OP
    Investor · Chattanooga, TN · Member since 2016 · 19 posts · 8 votes
    10y

    @Jon Q. Thank you for your insight. I can see how the quality of tenants go down with the more units per building. So if I went with a SFH, would you suggest sticking with the FHA loan with the down payment assistance? Do you have a suggestion for another way to creatively finance a deal, so I do not have to live in it until I reach 20% equity?

    0Reply
  • Jon Q.
    Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes
    10y

    If you invest with less than 20% down, you're taking on additional risk. You will also need money for a rehab, so I would not recommend investing in anything without having at least 25% of the purchase price in cash.  Even if you can buy with no money down, I would not recommend it.  If problems happen, you'll have no buffer of cash to fix it.

    The "no money down" is something real estate sales people with no experience sell newbies.  It doesn't really exist.  Even if you are able to buy a house with "no money down", if you have a problem and no way to fix it, you're headed to foreclosure and another 7 years until your credit score is back up so you can obtain financing again. 

    Instead, ready "Richest Man in Babylon" and "How I Turned $1,000 into a Million in Real Estate in My Spare Time" (the original version by William Nickerson), and begin putting together a definite conservative plan to build a real estate investment business with low risk of having to declare bankruptcy.  Anything worthwhile requires patience and hard work. There are no shortcuts.  Accept that, then do what you must to get what you want.

    You seem to still be at step 1 my friend.  Try to get to step 2, then step 3.

    1. Don't know what you don't know (high-risk)

    2. Know what you don't know (lower-risk) 

    3. Know/experienced a little (medium-risk) 


    Finally, work on these pieces so you are able and willing to take action.

    All human endeavors are accomplished with...

    Definite plans (a clear plan from here to there) + Faith (knowing you can) + Emotion (feeling you can) + Action (taking action) = Achievement of anything

    3Reply
  • Account Closed
    Contractor · Cleveland, TN · Member since 2016 · 75 posts · 18 votes
    9y

    Im with @Josh Braun on this one. I would go more bang for your buck by going with a quad just because you can house hack it of course and get a little extra income as far how you you crunch in those numbers. Do your due diligence on that and spend your time finding out what that particular property is worth for you and verify everything as far as utility and the expenses that come with owning a property. Everything will make sense and fall in place for you to move forward with a decision at the point. Also in your situation I would definitely go with FHA on this especially if your plans are to live it at least a year with the exception of the FHA guidelines. Great book to read for land lording is The book on Biggerpockets on Managing Rental Properties. I would also add to go and check out the webinar in the education tab and look at " How to analyze and find rental properties". Very crucial stuff to go through especially if your just starting and I hope that helps. If you have any questions Pm me anytime.

    Thanks

    Mike

    3Reply
  • Adam Summerer
    Lender · Franklin, TN · Member since 2026 · 12 posts · 2 votes
    4d

    For a first deal with thin cash, FHA on a 2–4 unit you live in is still the cleanest path — just budget reserves for vacancy on the rental side and make sure the unit mix appraises as a true multi. THDA assistance can help the down payment, but confirm the occupancy / second-lien rules before you count on stacking it. I'd take a duplex over chasing a fourplex on day one unless you've got a property manager lined up.

    0Reply
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