Strategy from first purchase to multiple properties?

Question

Hello BP, This is my first post and im really excited to be a part of the community here. I am currently renting and am looking at getting into Realestate investing by purchasing a duplex. I plan on living on one side and renting out the other. I have my financing all setup for an "owner occupied" duplex, FHA loan with 5% grant as a down payment. its essentially a 0 down loan. the problem i am having is there are limited properties available and i haven't had an offer stick yet. I want to explore other avenues for income properties while im waiting. i talked to a couple lenders about what the requirements are to get into a strictly investment SFH property without being owner occupied and the answer I've been hearing is I need 25% down. Is this typically what all buy and hold investors are putting down to acquire properties in there portfolios? I want to pursue Buy and Hold investing, would someone explain the basic strategy from purchasing your first rental to building a portfolio of multiple income properties. Thank you, Happy Investing!

Michael Noto · Answer

@Brent Salazar Welcome to BP.

For your first deal I would recommend being patient and waiting for a property where you can use the 5% down FHA owner occupied loan for a multi-family.  See if you like being a landlord first, learn the business a little bit with very little money out of pocket.

From there you can start researching other ways to acquire property.

I have had clients in Connecticut use this strategy and it has worked well for them.

Joe Ellis · Answer

@Brent Salazar, first off, welcome to BP! You're in the right place for investing!

There are multiple ways you can approach the B&H side. You could try flipping (if you can find a screamin deal and know your ARV is gonna net you a good return) and use that capital toward your investment props. You can try hard money lending (extremely expensive). You can try and take out a HELOC if you have a current property but from the sounds of your post that isn't an option quite yet. You could also try and ask family or friends if they or anyone they know has some extra money that they'd be willing to part with to help you, AKA private money OR try and find some nearby investors that are willing to partner with you on a deal (still private money), although usually if they would do that they probably already have. So you'd need to maybe combine private money and finding a great deal that might need some fixes and not be afraid of getting your hands dirty and willing to learn how to fix some things. I'm pretty sure @Brandon Turner's book Investing with Low and No Money Down would interest you if you don't have the time to search and spend hours on BP (most of us do both, haha).

Good luck!

Account Closed · Answer

@Brent Salazar  Don't buy anything until you close the property you are currently looking for.  After that you might want to also look for owner financed deals.  It is sometimes possible to get an owner financed deal to cash flow.

Tim Ryan · Answer

I like your strategy to buy your duplex. Maybe you one a bit run down (so you can find that deal) and fix up while you live there... "Buy in your own backyard first" is a good idea to learn by doing.

Next you need to start getting investors to take down the larger properties with you. You can't do it alone or it will take too many years.

I read Richard Branson's book last year "Losing My Virginity" and it has changed my life. What I learned most is he brought in partners and professionals in every business he owns.

Jeremy Pace · Answer

@Brent Salazar

Welcome to BP.

@Michael Noto is giving some solid advice.  Do the analysis, and find an FHA owner-occupied multi.  Just make sure the numbers work both while you live there, and after you move out.

Bonnie Hyslop · Answer

As well as buying a duplex I would look into owner financing.  You can negotiate the terms and it could be much better than the FHA loan.  I just came into a property with no money down, no interest and paying for 20 years.  It's a cash flowing property and a great deal.

Brent Salazar · Answer

Thanks for the great advice everyone. The duplex strategy seems to be the best fit for me at this time, and if i can get a property with the opportunity to add some sweat equity that would right up my ally. I will get the books you recommended, because after this first property the only way i see to grow more than a house a year is to start making deals with partners/ private money. I am very interested in the thought of Flipping or BRRR method as well.

David Faulkner · Answer

House hacking a duplex is a great strategy, but I would also look into doing similar with a SFR and renting rooms. Whichever way you find the best deal, but I wouldn't rule out SFRs, or triplexes, or fourplexes for that matter. In general, the duplex will have better cash flow but you may find that a SFR has better appreciation and "value add" opportunities since you can eventually sell to either an investor or a retail buyer looking for a primary residence; and there are way more SFRs than duplexes to chose from. Just buy in a hood with NO HOA. After a couple years as a primary residence, you can buy another place and either rent out or sell tax free the 1st place (depending on the market, your goals, and your finances) ... personally, I prefer to hold and acquire the next place when the market tanks, then sell if I want when the market turns around ... buy low, sell high rather than sell low, buy low or sell high, buy high like most people do.

Strategy from first purchase to multiple properties?

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