Which property should be my 2nd purchase?

Question

New here. Lots of helpful topics discussed, so I'm hoping to get a few opinions on my situation.

About 10 months ago I purchased a duplex in Pittsburgh, which I currently live in half, and rent out the other unit. Great stuff so far -- no regrets. Grew up here and love the area as a whole. However, I'm wondering what my next step/purchase should be...

Would it be smarter to find a single family home (my next move will be into a home, not another owner-occupied) and rent my current duplex out, and then buy more investments down the road?  Or would it be better to save up enough to get another 100% investment property and find my SFH down the road? Is there a more common route to go here? I'm fine where I'm living now, so I'm not in a rush to move, but I don't want to sit around and miss out on a property (multi OR SFH) this summer if I'm financially ready.

Looking for opinions on what order would be the smartest.

Joe Villeneuve · Answer

Which one sets you up for your 3rd purchase?

Account Closed · Answer

If I had the opportunity to buy owner occupied multi families 2-4 units that’s what I would do.

If you don’t “need” a SFH for yourself and can live just fine in a 2-4 unit multi I would do that annually.  It’s the cheapest money and allows you to save well creating investment properties.

Robert Kohnfelder · Answer

Update: I bought a SFH in summer of 2019 and I have no regrets. My fully-rented duplex is paying for 100% of my SFH mortgage, and I have been able to save up enough for some important trips/investments with my family and girlfriend.

Not sure what my next purchase will be, since I'll hopefully be acquiring another investment property by the end of 2020... Great early success with the duplex has me leaning towards another multi-unit if the right one surfaces, especially since I'll be staying in my current home for the foreseeable future. It's just the down payment that scares me away from another multi, because I don't want to own 3 homes (possibly twice as many units) without a sizable emergency fund in my bank account...

Anyway, just wanted to update this post and say thanks - any additional insight is always appreciated, since this is a topic that is sure to be an on-going debate in my mind.

Happy new year!

Frank Geiger · Answer

@Joe Villeneuve posts the realist content. I wish I thought more like that starting out. It's all about following your strategy to get to your end goal. Work your end goal, then find the best way to achieve that goal.

Joe Villeneuve · Answer

Relying on rental income, and the time it takes to accumulate enough to use on another deal, doesn't qualify in my mind as anything moving forward.  You need to set up your money movement faster.  Your seed money needs to be a verb...not a noun, and every deal you make should be made where the exit strategy from that deal sets up the entrance to the next deal(s).  Cash flow exits in this case are too slow.  By the time you get to where you need to be, the playing field has changed at least 2 or 3 times...and the rules along with it.

Joe Villeneuve · Answer

Reverse engineering.  It's the way the solution to every problem can be found.

Robert Kohnfelder · Answer

Thanks for the input. I wouldn't say I "need" a SFH, although I would also be occupying it with my girlfriend, which is what I'm currently doing in half of the duplex we own. However, I'm just not sure how I feel about constantly moving into the new multi units that I'd be interested in. I'd rather do a SFH for the purpose of settling in long term (and getting more investments later), or just buy an investment property that I can rent/manage without having to move out of my current situation yet (and get that SFH later). Not sure if one makes more sense than the other.

Calvin Ozanick · Answer

You should use this to determine your ultimate goal. If you do not mind the owner occupied as of right now, I would jump into the duplex next. However, if you are ready for a change, go to the SFH and take your time.

Robert Kohnfelder · Answer

@Jeremy Taggart Thanks for the insight. Really good points you made... I do like the idea of possibly looking into a SFH that would serve as a slightly longer-term living arrangement with the end goal of renting it out in the next few years. Ideally I'd pursue another multi-unit but that 25% mark is daunting at this stage -- don't want to go house broke.

Also, @Nicole Duncan I agree that paying the entire mortgage without any rental income from the property will be very different, but I don't know if I'm ready to jump into another multi-unit as an owner/occupant. If I could save up that 25% on a reasonably priced multi-unit, I think it would sense to purchase a 100% investment property and start raking in rental from each unit, no? I understand it would require more money down, but if the 25% down payment were no longer an issue, I tend to believe that would be the best move.

Jeremy Taggart · Answer

@Robert Kohnfelder If you want a SFH for you and the girlfriend, you can go 5% down conventional and just buy a SFH that makes sense as a future rental property. Kill 2 birds with 1 stone. Live there until you decide you want to move into a more longer term SFH that you buy with the intention to be your home rather than a future rental.

Also, if you want to buy another multi-unit with a low down payment, S&T Bank offers a portfolio loan that you can go as low as 5% down on owner occupied 2-4 units even though you already have an FHA loan. This is what I just used in order to be able to buy another multi unit to move into.

All a matter of what your priorities are but either could make sense.

Which property should be my 2nd purchase?

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