Which came first the live in 4plex or the cashflowing SF rentals?

[Christopher Ward]

So like many other starry eyed first time investors I have read and heard about I am looking to make my first real estate investment into a fourplex in which I will live in 1 unit and rent out the other 3. I am locked into my lease at my apartment for 8 more months so that will not be happening anytime in the immediate future but I am fairly certain that is the route I want to go. In the meantime however I have been hearing quite a bit about out of state, single family, turn-key rentals and have been wanting to maybe give these a try, as it is a much smaller investment and can get me started quicker. I know most of the pro's but only some of the cons to these turn key properties so I need to research this a little more.

My question is which one I should be focused on more? The turnkey properties since I can invest and get started with them now? Or the fourplex since it is going to be a much bigger and more important investment to my portfolio starting off? From a buying and leverage standpoint which one would benefit me more to buying first? I think if I purchase a cheaper turnkey property or 2 I may not look as lend-worthy (if that's a word lol) to banks and may get stuck with higher rates or be more likely to be denied if I already have a large loan or 2. Any and all opinions welcome!!

Thanks!

[Ali Boone]

Hmmm...good question! For clarification, if you were to buy turnkeys, would you be focusing on particular areas or anywhere that is good? 

I think the answer lies in the cash flow of each option. How much would you anticipate making? The 4plex in Austin might be quite minimal, or negative, on the cash flow--but you could get an FHA loan and it's better than buying a SFR for yourself. But if you would only be looking at turnkeys in your area, those won't cash flow much either. Or if you look at turnkeys in various locations, the cash flow on those might be really nice and that income could help you move towards that 4plex. And as far as the loans, you should still be able to get loans if you grab a couple turnkeys. I'd confirm with an investor-specializing lender (can you get an FHA, if that's what you want, if you own the couple turnkeys).