First time homebuyers looking for a duplex, triplex, or MFU.

[Will Benham]

Hi there everyone! Excited to get started on the process of learning more about REI here in the BP community.

A little background, my wife and I just moved back to the Atlanta area and we're looking to find a multifamily property to live in and rent. It will be our first home, but we're hoping to build a strong network of buy and hold properties over time.

Now, for the questions. I've been poking around the reading list (and of course read the free E-book), but I'm still looking for some more concrete guides to determining the value of REI specific to our situation. It seems like all the guides approach a purchase strictly from an investment perspective, but since we'll be living in one of our units, does that change anything?

2. Any favorite books/resources that covered valuation? I'm interested to learn more about the math behind the deals and really dive into it so I can better understand what makes REI work.

3. What is one thing you were too naive to ask when you started out that you wish someone had told you?

Thanks so much! I look forward to learning more and getting to know y'all better.

[Azeez K.]

Hi @Will Benham

Welcome to BP! Hope Atlanta is treating you well so far. 

In regards to your questions below are my thoughts:

1. House Hacking MF: It is certainly possible for you and your wife to house hack MF and live in one unit and rent the others. However, there are several factors that would come in play in the short term and long term. Before you go down this path it is important that you discuss the options with your spouse and make sure you both understand what you are getting into. Short term you can possibly find a MF that will cash flow or pay major portion of your PITI (principal, interest, taxes and insurance) however, to find a MF that will cash flow in todays market you will most likely have to find a property in area that may not have good schools, safety concern, proximity etc. these factors will come in to play in the long term. You have to carefully evaluate the hassle factor vs. the yield. Ideally, you need to find an investment where the hassle factor is minimum and yield is maximum. About Atlanta MF: Currently, prices for Atlanta MF (duplex-quad) and even on the commercial side (5 units and more) are very high. The high prices don't justify the valuation. In simple terms the money generated as monthly rents in most cases will not result in a positive cash flow. In most cases your cash-flow will be negative or you will get very low returns because the property prices are so high. The key is to buy right i.e. the day you buy is the day you make money. So look for properties that are valued under market value and presents significant opportunities for value add opportunities such as repositioning a property and/or increasing the rents. Since it is your first home you should certainly focus on buying right and not overpaying for the property. You really need to understand the valuation.

There are three approaches to valuation of property:

1. Sales Comparison Approach - commonly used to SFR.

2. Income Approach - This is what you will use primarily for MF properties. Key concepts to learn here are CAP rates, Cash on Cash Return, Debt-service-coverage ration, IRR, NOI.

3. Cost Approach - what it would cost to build an eqvivalent property. 

For the most part focus on 2. Since you will be staying in one of the units chances are you won't be cash flowing. However, the money generated would cover may be 60-75% of your PITI or even more.

2. Book: MF Millions by David Lindahl. However, instead of reading books keep looking at different MF properties and every day analyze one or two properties that you think would be good or not good. The more you analyze the better you will become at valuing the property and understanding the value.

3. Agree with @Jason Hern - don't get emotionally involved

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