Orlando: wait for the right multifamily or get a SFR?

Question

Hi everyone. I am an airline pilot and a new real estate agent (1 deal so far), currently renting in Orlando FL and I'm not sure what to do next. Here is the scenario:

I need to stay within 30 min of the airport. I've been looking into getting a multifamily property (house hack it), do an FHA loan and use part of my commission towards the closing costs (I'd also be taking a gift from a family member to cover a portion of the downpayment). So far, I haven't been able to find anything that makes sense. I did find a 4plex in Kissimmee, made an offer for it (full asking $675k), but they didn't accept it. Other than that I haven't seen anything else.

On the other hand, there is community in St Cloud, which is selling brand new construction. They pay a commission and they cover the majority of the closing costs. So I could basically get the property for 0 down. Asking price is $385k, which compared to the prices in Orlando especially near Lake Nona, I think is super reasonable even more so for new construction.

With the market being this hot right now, I'm not sure what's the best way to go. Any ideas? My rent is going from $1350 to $1800 in April.

I'm not super handy when it comes to repairs, and I also don't have a lot of cash to put down. I'd love to implement the BRRRR method but I don't have the capital to do it right now.

I'm fascinated about real estate and want to become financially independent through it, but I'm still learning. Any and all pointers would be greatly appreciated.

Thank you for your time.

Tyler Gibson · Answer

I think your concern about overpaying is understandable but misguided. If, as you say interest rates are rising (which they are and will continue till inflation is in check) then waiting to buy will cost you more. Even if there is a market adjustment of 10% the rise in interest would likely offset the savings. More importantly the longer you wait to buy the more you waste money on rent.

Gabriel Araya · Answer

Alberto,Thank you for the encouragement sir! I really appreciate it.Congratulations for closing that deal!! I hope I can follow your footsteps pretty soon. I do want the MF but with my rent going up soon, time is not in my favor. On the other hand I’m a bit worried that if I buy something now, I’ll be overpaying for it. There’s a lot of talk about the prices coming down as the market cools due to higher interest rates, making homes less affordable and away the demand. I guess that’s just something I need to accept and move fwd.Definitely interesting times to get into real estate investing haha. Thank you once again sir.

Gabriel Araya · Answer

Tim,THANK YOU for all your advice, I really really appreciate you taking the time to explain everything in such a detailed way. I’ll update this post once I make a deal!

Gabriel Araya · Answer

Thank you for the input Tyler!Yeah, I’ve made two offers on SFH and even one on a Condo but they had multiple offers and they went over asking. I just don’t see this market environment being sustainable in the long run. I do believe, based on data from the US Census Bureau and Labor Bureau, that a correction will occur.

Alberto Nikodimov · Answer

Hi @Gabriel Araya, I agree with all of the above but I would like to add some first hand experience and local knowledge. I will be closing on a duplex in Orange City tomorrow which I will be using as a househack. It only took me a year to find it! :D However, I am very happy that I waited until I found exactly what I was looking for. This was also a super valuable experience. I learned a lot during the process and my vision about what I wanted became clearer and clearer as I was progressing. At the end it paid off.Here are some of the highlights:- I placed more than 30 offers and I was under contract 3 times before securing the duplex I wanted.- Property was on the market for a while and it was overpriced. I renegotiated 3 times with the sellers - initial large discount, repairs worth $6,000 post inspection and $19,000 price deduction after appraisal.- 17% discount on the purchase price.- Very solid and well cared for home. Outdated but in a great shape.- I used 3.5% FHA loan and applied my commission towards the down payment. Initially the plan was to buy with $0 by having the seller pay for closing but that's nearly impossible in the MF market in Orlando.I still purchased the unit with less than $15,000 out of pocket and I can leave with that since I got such a huge discount on the price.- My budget for renovations in about $15,000 and this will allow me to refinance if I wanted to but I'm not sure if I'm interested in that option for now.- Mortgage payment will be around $1,935. The current market rent is $1,500. However, my plan is to do short term rentals with the other side of the duplex which will easily cover mortgage payments, bills and provide some cashflow. The goal of this post was to show you that it is doable but it's not easy! It takes a lot of time, persistence and skill. These are all things you can acquire and since you are on BP it seems like you are on the right path! I had the same dilemma about purchasing a SFH with $0 in a good area and it is a solid strategy but I felt like I will be settling for second place decided to keep chasing my duplex! I'm glad I did!I will be happy to connect with you and give you some additional details. I will also be making a detailed post for the project in the future and I will include pictures and videos.

Tim Johnson · Answer

Gabriel, it's never bad to pay down a mortgage....and it's never bad to pay down a mortgage faster. But here's the scoop. For an investor, leverage is gold. Therefore in most cases you will want to get loan terms that allow the LONGEST payback with the LOWEST monthly payment.1. This will make sure that you're not under more pressure than you need to be. During the big recession in 2008-11 a LOT of folks were able to keep paying their mortgage - even after losing a job - because their monthly payments were lower.2. This will also make sure that when you rent your home - the rent income will be able to cover your PITI payments, maintenance, capex, prop management fees, and vacancy... as well as providing some monthly CASH FLOW, that you can use NOW.3. But there's more.... there is NO penalty for paying this mortgage down early. In other words, when you're able to, you can effectively turn this "30-year / high interest loan" into a "15-year / lower interest loan" without any paperwork or permission from the bank. Just pay more down on the principal every month - as much as you want or are able - pay it off in 5 or 10 years.... your choice.... and on your schedule.4. So, yes, thinking about all the interest you could possibly pay over 30 years can be heart-stopping... and it should be. But remember, you probably won't own it that long; if you do, you'll let the renters pay for all that interest; or, best of all - you'll find a way to pay it down faster than 30 years. No matter what scenario you choose - you'll win with longer terms up front.

Gabriel Araya · Answer

Thank you so much for your response Tim!St Cloud is actually a good area because it’s growing. A neighborhood just South of Orlando called Lake Nona is now where everyone wants to live. Because of that it’s expensive. This SFR is just 10min further South from Lake Nona. And yes, I’d still be close enough to the airport.Now, as far as the mortgage goes… of I do a 15year loan I’d pay about $82k in interest, if I go for 30yr loan, I’d pay about $260 in interest. My brain tells me to go for the 15yr and make some adjustments. What would you recommend? The APR is a 1% less on the 15yr fixed.Thank you once again sir!

Tim Johnson · Answer

What would the future rent demand and situation be in that St. Cloud development? You could 1. purchase an SFR in St. Cloud (allowing you to quit paying rent and pay down on a mortgage instead) - Is that close enough to the airport? 2. Next, you could take time to find just the right multifamily.....when you do, rent your St. Cloud home out (or sell it), and move into the multifamily as your primary. The picture's looking brighter now.... all while getting into real estate and flying an airplane.