9 months taking the plunge into investing!!

[Kimberly H.]

I'm so excited about finally being able to investment in real estate. My husband owned a house when we married so my slate is entirely clean and I had issues with my credit, but that has since been cleaned up and my fico score is in range to purchase property.

My dilemma:  I'm interested in owner-occupying a multi-family house and following some of the investment rules (1.5-2%, cap rate, etc), but how do I get pass some of the issues with location and losing some of my privacy.  I still want to live nicely, but when I look at the multi-family homes that I like they are well under positive CF.  The properties that fit my criteria are in so-so neighborhoods. I know I only have to reside in the property for 1-2 years, but I need to get over it. :(

Should I just plop 20% down and stay where I am or should I do owner-occupy and suffer it out.   Not sure which direction would make the most since in the long haul.  I really want to start building cash-flow.  Oh, if I do owner-occupy I would rent my current house our too and that will bring positive CF as well.

Decisions... decisions.. decisions.... Any one with input.

Thanks! - Kim

[Andy Gross]

As another seasoned investor once said, don't do a deal just to do a deal. It's gotta be right.

With that in mind, there are plenty of good 3-4 unit properties in Baltimore in good B neighborhoods such as Bolton Hill, Mt. Vernon, Charles Village, etc. If you area bit more intrepid, B- to C+ neighborhoods like Station North or North Calvet Green in Barclay might be your thing. They generally won't fit the 2% rule, but you certainly find decent properties that come close and fit the 50% rule. You certainly won't cash flow if you are living in one of the units, but, your housing will be free or nearly free. From my research, to get 2%, you are looking at single family townhomes in C to D+ neighborhoods. If you are looking for 2% in a A or A- neighborhoods, you are going to be looking for a while. Living in Charles Village, Bolton Hill, etc, can be a lot of fun, because you are within spitting distance of great restaurants, great parks, etc. It's still in Baltimore, so you have to cognizant of the realities of living in the big city, but it's a ton of fun.

The other question concerns sacrifice. If you live in your multi-family property for 2 years, you can save a significant amount of money while learning some valuable lessons in property management. It's not your dream house, but with the money you save, you'll be that much closer to your dream house or moving on to your next investment. In 2010, when I got my first real job, I kept my college car until it died. I could have afforded a BMW, but I went with a Honda, because I wanted to use that money to pay down college debt and save for investing.
If you have school aged children, living in your multi-unit may not appeal to you. But, everything comes with a trade-off.