First Home - Multifamily or Single Family?

Question

Hi all, so I'm very new to real estate, and currently my situation is to either buy a multifamily and househack (300-400k) or a single family (<300k). Currently my loan officer (and friend) is saying that the market in san antonio, at least, is more of a buyer's market now and that you're able to get houses that are pretty discounted thus getting equity right off the bat. At first, I wanted to go the househack route, but I'm wondering what I'm really gaining from doing this that I couldn't gain from getting a single family, such as renting after I leave to fha another property and live there + gaining equity, besides decreasing my effective mortgage.

Also, I imagine in a few years as interest rates decrease, the demand for buying single family would go up and demand for multifamily/renting would go down, or atleast not increase. Overall, I'm thinking the gain in property value would be higher in a single family over the next few years.

Am I thinking about this the right way? Any guidance would be appreciated.

Also, I imagine in a few years as interest rates decrease, the demand for buying single family would go up and demand for multifamily/renting would go down, or atleast not increase. Overall, I'm thinking the gain in property value would be higher in a single family over the next few years.

Am I thinking about this the right way? Any guidance would be appreciated.

Julien Jeannot · Answer

The duplex is my personal favorite for new investors, but whether it's better than a single-family house depends on your specific goals and circumstances. Here are some reasons why some investors might prefer a duplex:

• Rental      Income: A duplex typically has two separate units, which means you can      rent out one unit while living in the other. This dual income stream can      help offset your mortgage and other expenses, making it easier to cover      costs and potentially turn a profit sooner than with a single-family home.
• Cash      Flow Potential: The rental income from one unit can help you generate      positive cash flow more easily compared to a single-family home. This can      provide a steady income stream that can be reinvested or used for other      financial goals.
• Lower      Down Payment: In some cases, you may be able to qualify for a lower      down payment when purchasing a duplex, especially if you plan to live in      one of the units. This can reduce your upfront costs and make it more      accessible for first-time investors.
• Property      Management Experience: Managing a duplex can be a good way to gain      experience in property management, especially if you live in one of the      units. This hands-on experience can be valuable as you grow your real      estate investment portfolio.
• Hedge      Against Vacancy: With two units, you have a built-in hedge against      vacancy. If one unit becomes vacant, you still have rental income from the      other unit to help cover expenses. In a single-family home, if the tenant      leaves, you lose all rental income.
• Potential      for Appreciation: Real estate values can appreciate over time, and a      duplex in the right location can provide opportunities for property value      growth. This can be advantageous when you decide to sell or refinance.
• Diversification:
     Owning a duplex diversifies your real estate investment by having two      income-producing units in one property. This diversification can help      spread risk.

However, it's essential to consider potential downsides and challenges as well:

• Property      Management: Managing tenants and maintenance for multiple units can be      more time-consuming and challenging than dealing with a single-family      home.
• Privacy:      Living in one unit of a duplex means you'll share a property with tenants,      which may affect your privacy.
• Financing:      While duplexes can offer lower down payment options, they may also have      stricter financing requirements, and interest rates can be slightly higher      compared to single-family homes.
• Location:      Not all areas have a suitable supply of duplex properties, so you might      have to compromise on location.

Ultimately, whether a duplex is better than a single-family house for you depends on your financial goals, risk tolerance, and willingness to manage tenants and property

As far as appreciation, its market dependent. In my area, properties up to a fourplex behaves very similarly as a SFR.

James McMurrey · Answer

@Jay ChinIt all depends on your goals. Most house hackers go for a duplex or triplex on their 1st or 2nd purchase because the rental revenue is much higher compared to their mortgage payments. Plus, you jump start into 2 or 3 units instead of just 1 unit if your ulimate goal is a larger portfolio. However, it can be a wake up call when it comes to managing a tenant that lives next door and the risk of more maintenance is always there the larger the sq ft.

If you go with a SFH, you will likely use your FHA or VA loan eligiblity when it could be used on a duplex or triplex. Either way is successful, just depends on what's important to you.

Happy to hop on a call and help strategize. Not questioning your friend but I'm pretty sure it's not a buyer's market anywhere, INVENTORY IS STILL LOW. Ask a realtor for market knowledge. Us loan officers are better at mortgage industry knowledge.

-James
Veterans Alliance- Umortgage

NMLS 2302283

Alexandria Harden · Answer

@Jay Chin

I agree with everyone making this decision will always be what you want out of this purchase. I believe if you are wanting to become an investor house hacking a multifamily is the easiest way to learn what kind of investor you are as well as taken a portion of your own housing budget down.

It's definitely a different market and you need to be aware of that. I think you should continue to ask questions and reach out to agents and give yourself a buy box of no, maybe and yes criteria of a home so when you are sent a yes you know its worth it. Good luck!

Garrett Brown · Answer

think it depends on your goals.are you wanting cash flow ?or are you "hoping" for a raise in SFH market for equity gain?most people house hack to lower their payments and add cash flow so if thats the case i think you have your answer.i would still do a great deal of research to ensure rents in the areas youre looking though.

Jose Campos · Answer

Agree 100% here. It is definitely not a buyer's market, or a seller's market. It is just a weird market with high prices, high rates, and low inventory and people who have great rates, aka under 5% not willing to part ways with those rates, not necessarily their homes.

Also, I understand you are new, but not sure getting something a little discounted or slightly below market means you have built in equity. If you believe the market is perfect or at least an unbiased equalizer, the price you pay was the right price, because you were willing to pay it. I would say equity can be built over time with appreciation, or forced rapidly with a rehab, rent change etc.

Good luck!

First Home - Multifamily or Single Family?

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