Quote from @Joey Klusmann:
My girlfriend and I have been exploring the idea of purchasing a multi-family property as our first investment, in addition to owning our primary residence. We're based in the Pacific Northwest and have primarily focused our search in this region.
One of the main challenges we've encountered is that multi-family properties tend to be quite expensive—typically starting in the mid-$500,000s and up. When we compare the mortgage costs to the average rental income in these areas, the numbers often don’t support positive cash flow.
We've considered purchasing an investment property without living in it, but that would require a 20% down payment. Alternatively, if we were to move into the property and live there for at least a year, we could qualify for a 3.5% down payment. However, the resulting mortgage would be significantly higher, and it’s unlikely we could charge enough rent to cover it.
We have a few questions:
1. Is a HELOC the best way to access cash for purchasing an investment property, or are there better alternatives?
2. Are there any loan options that allow for a low percentage down payment on an investment property if we don’t plan to live in it?
3. Is there anyone familiar with the Pacific Northwest market who can offer tips or advice on finding cash-flow-positive properties?
Hey @Joey Klusmann jumping in to the PNW real estate game is exciting! I'm very familiar with the major WA markets but less so the OR markets.
To answer your questions:
1. Is a HELOC the best way to access cash for purchasing an investment property, or are there better alternatives?
You can absolutely use a HELOC to access capital, though it comes at a cost and may further hurt your already tight cashflow numbers. It doesn't hurt to get a HELOC in place now in case you stumble upon a lightning in a bottle opportunity where you need the capital. But I wouldn't call it the most efficient capital.
2. Are there any loan options that allow for a low percentage down payment on an investment property if we don’t plan to live in it?
Non-owner occupant multifamily loans are almost always 15% down+.
3. Is there anyone familiar with the Pacific Northwest market who can offer tips or advice on finding cash-flow-positive properties?
I find cashflowing rental properties fairly often here in the PNW. It comes down to your risk tolerance, willingness to live in a unit or not, and where you want to live. This is very much possible. For example I came across a townhouse-style duplex recently with 2 2bed/2ba's in the high 700's. Each unit would rent for 3250+ and would be a decent live-in 3.5% down play. Is this massive cashflow? No. Is there room to budget for maintenance, capex, vacancy, etc? Yes.
Unless you're willing to put a substantial amount down (30% or more) or live in one of the units, it's not easy to find cashflow. If it was easy, everyone would be doing it ;)
