Advice for strategy as a first time home buyer & investor

[David Neubauer]

Hello all, 

I am currently living in a small apartment which I am renting. 

Within the next 2-3 years I plan on buying my first home. 

Currently, my parents are looking to downsize their home, and I came up with the idea to purchase a 3-4 unit multifamily investment home, where I can live in 1 unit for a year, they live in another, and we rent out the other 1-2 units. I am hoping to purchase the property in their name, and put it in a trust for later down the road. 

- How does this strategy sound to you experts? 

- Will this strategy impact my long home buying abilities 2-3 years from now when I am looking for my long term residence, and if so how? 

- With the property I intend to purchase 2-3 years from now I would hope to get a 15 or 30 yr conventional loan, but what should I consider for the investment property (hoping to put down as little as possible).

Thank you all in advance! :)

[Steve Kenney]

Hey David,

I like this idea, but a couple things to consider:

1. Do you have a good relationship with your parents and are you comfortable collecting rent from them, addressing maintenance requests for them and things like that? If they can be difficult to work with, then I'd be careful renting to them as it's not worth ruining a relationship.

2. Why do you want to put the property in their name? Why not just purchase it yourself?

3. If you live in the property there are some great owner-occupy loans available, like FHA or low money down conventional loans. You'll want to talk to a few local lenders to get a better idea what you'll qualify for and what the terms of the loans are.

4. You can live in the property for a year and then move out, buy another multifamily to live in, and use another low money down owner occupy loan. You need to live in the property for at least a year but you can repeat this year after year if you don't mind moving. 

5. If you live in the property for two years and want to sell, you won't pay capital gains tax, so that is just another thing to keep in mind. 

6. Buying a multifamily shouldn't impact your ability to get a home loan for a single family in the future, so I wouldn't let that deter you. I'd just make sure the multifamily is cashflow positive when it's fully rented out (as in after you've moved out and rented the unit).