Advice on buying Multi-Unit Property as Primary Residence

[Michael Sykora]

Hello Everyone,

I live in San Francisco and am currently renting. I have been wanting to jump into real estate investing for some time now and seeing how I would also like to own a home, I feel as though purchasing a multi-unit property as my primary residence would be a great way to achieve both of these goals. I was curious if anyone could provide me with some advice on this topic from their own experience. Specifically, the SF bay area is obviously one of the most expensive real estate markets in the country, therefore there are a number of items I'm trying to think through (like financing, working around the FHA limits which are pretty low for SF Bay Area prices, etc) but specifically I'm trying to figure out how to find the right opportunity:

When looking for a multi-unit property as an investment, cash flow is usually the goal. Some people use the $100/month/unit calculation.  However in the SF market, I don't see it possible to find a duplex, triplex, 4-plex where the rent from the other units would cover my mortgage completely.  Therefore I'm having trouble deciding how much I would be willing to pay for my share of the mortgage compared to that covered by the other units.  Ex: Let's say that I find a triplex where the other two units pay $2K/month in rent, I wouldn't want my expenses (including mortgage) to be $6K/month.  What should my goal be?  For my portion of the mortgage to be half of what the other units pay in rent?  Should I use the $100/month/unit calculation as if I was just another tenant?  I'm having trouble figuring out a good 'rule of thumb.'

Thanks in advance for any help/advice people can provide.

[Jerry Padilla]

@Michael Sykora

In the more costly area's of the country you have to focus more on equity building, in my opinion. Look for the properties on the MLS that have the best rental income, thus requiring you to pay the least amount towards your mortgage. Are you thinking of going FHA so that you have little out of pocket expenses?