Advice for getting started

[Anthony Torri]

I recommend to anyone 2 different paths when purchasing a primary residence. The snowball method or the portfolio method.

The snowball is buying the worst house in a great area. Most likely going to be single family and not generate rental income, but should appreciate at a greater rate than a small multi in lower grade neighborhood. Live there for 2 years, sell with any capital gains being tax free (first $250k if single, $500k if married), then repeat the process in a higher value area.

Does not have to be a fixer upper, but that would give the best return. This would be riskier and take longer. If you have time and are comfortable, look into a FHA Rehab/203k loan. You only have to put %3.5 down and the bank will pay the contractor directly for their work. The rehab costs will be added to the principle of the loan used for the purchase.

The portfolio method is house hacking 2-4 unit small multifamily homes. The main 2 differences here is you are targeting small multi family properties and you don't plan on selling it. What is key is to really understand the area you want to live in. 

With this method, make sure you are comfortable living there by driving by and looking up crime data. Other things could be the utilities accessible in that area. Some entire towns or certain areas may only have septic available for waste, only private well for water supply, and oil for heat. If you are brand new to maintaining properties, I highly recommend staying away from any property that has 2/3 of the 3 utility options I mentioned. Long story short, you could be walking into expensive issues at the time of purchase or face them within the first few years of purchasing and you likely won't have a lot of reserves built up yet to handle them.

Personally, I recommend looking for natural gas for heat (with separate gas meters), city water, and city sewer. A big plus would be electrical amperage of at least 100amps per unit, with each unit having its own meter and panel.

Don't walk away from deal where the number works just because the home does not have all these utilities perfectly set up. Some of these things can be changed or upgraded after you purchase it.

While living here, your top priority should be to optimize the property. Cosmetically upgrade the unit you live in before you leave and rent it out. Add a dishwasher if it does not have one. Add washer and dryer hook ups in the unit or in the basement. Clean up the landscaping outside. Get the other units there on your new lease at the current market rate. It is harder and more time consuming to do these things when you are not living there anymore.

This is a little more info than I planned on giving for this type of post. The goal in the beginning is to dumb things down, understand what method suits your life at the moment, and make a purchase. The longer you wait to buy the first one, the longer it will take to by the second.

Message me any time if you have any questions.