Ready for my first Buy and hold How would you proceed??

Question

Currently, i have been saving for the past 2 years in order to be at this point ready to purchase a house with 25% down on around a $270- $300k Home, I am investing in San Antonio Texas,

If you were in my position starting out im curious to see what others would do?

My current plan is to buy a house with 4-5 bedrooms and then rent out each room 2 of which are already agreed to come in and pay rent monthly,

is there anyone who has started out in real estate similarly?

Account Closed · Answer

Renting rooms can be difficult depending on where the house is located. If you are looking close to Lackland, Randolph or Ft. Sam you might be able to find some military types to come in and each rent a room on separate leases. Maybe less likely from Ft. Sam given the type of base it is and its location. I agree with the other that multi-family is a great place to start.

Shae Green · Answer

@Andrew Gomez

One thing I'd say is to make sure the numbers still work on the property if you don't rent it out room by room. I bought a 5 bed planning on renting it by the room but realized quickly that this means 5x the turnover, 5x advertising, and it is a lot more work. Its good to make sure the numbers will work if in the future you decide to rent out the place as one entire unit

Naz Hossain · Answer

I agree to a certain extent with Joseph. Getting a duplex is always a good move. But, renting one unit will not cash flow either unless your monthly payment is that low. If you rent each of your 4 bedrooms and live in the 5th, you'd be more likely to cash flow. I can kind of see it being a problem once you move out. I am not a 100%, still learning as it comes. I am doing the exact same thing. I am house hacking a house I bought in San Antonio. Not cash flowing since I just have the one roommate, but I am paying less than renting an apartment in a nice area for sure! It is a win in my books. Less I/you spend, more you can save to put into other deals.

Nicholas L. · Answer

@Andrew Gomez congrats on working hard to accumulate significant savings.  Just be aware that buying something with a purchase price in that range by putting 25% down is going to tie up a ton of cash.  You're going to have all of the following costs:

• Down payment
• Closing costs
• Vacancy / holding costs while placing tenants
• Commissions to find, place and screen tenants
• Repair / spruce-up costs
•

Be sure you've actually run a grand total before you put an offer in so you know the full amount you'll be spending.  And, there are some great threads on BP about reusing cash - take a look.

Andrew Gomez · Answer

@Nazakat Hossain

Exactly this was what i was looking for given i want to live in the house hack and rent out the other rooms i feel like it would be a win win situation for me

Joseph Cacciapaglia · Answer

@Andrew Gomez do you intend to live in one of those rooms, or is this a pure investment? If it is a house hack, it probably won't cash flow as a traditional rental, if/when you decide to move out. I also think that by the room rentals are going to be problematic in the short term. At that price point, you might want to consider two homes or a duplex. $300K will buy you most duplexes here in San Antonio, and is even pretty close to buying some new construction duplexes. My first investment was a duplex. I rented out one side, and rented the extra bedroom on my side. Once I moved out, it cash flowed with two traditional rentals.

Naz Hossain · Answer

Agree with @Nicholas L. 25% is a lot of money that you probably wont see for a long long time. Recycling cash is key. You have to make the decision about how you want to live. Since this is, I am assuming, going to be your primary residence, are you going to be ok living very minimally and sharing space with people you just met? What is your tolerance level? One thing that is correct is that you are almost 100% certain that you will cash flow if you get a small multifamily. The same cannot be said about single family, unless, you buy right.

Sarita Scherpereel · Answer

@Andrew Gomez I agree with @Joseph Cacciapaglia. I also want to add that there’s risks with this tenant model. If you were in a college town- like Lubbock. This might get you a few years down the road. However 4-5 people that might not know each other in the future agreeing to pay decent rent for share of the property seems like a limiting business model. My parents bought a house in Lubbock for my brother while he was in college. He rented to friends but two years after he graduated it was harder to find quality tenants that would live like this. I’m

Not trying to crush your dreams but I see this as a very limited tenant demographic that could be limiting.

Sometimes your first hack is just a hack to get your mortgage to be less than your rent. Cash flow is important but don’t forget to look at ARV so that you can refinance and by the next one. You’re not going to be a millionaire on your first property. It’s just the stepping stone. You’ll get there!

Joseph Cacciapaglia · Answer

How does going with the single family maximize the ROI? Are you expecting better appreciation or higher rent? I guess I'm missing what your assumptions are regarding rent per room for a SF. With a 3/2 each side duplex, you could still have the 2 roommates on your side, and also have a second standard rental unit. I've just seen the renting to roommates strategy go bad for a number of people, so I'm strongly biased towards multifamily properties.

Andrew Gomez · Answer

@Joseph Cacciapaglia

I absolutely agree, however being that i do want to live in one of the rooms and have a couple of tenants lined up room wise i think that would be the better shot given that my main goal would be total ROI after 3 years or so given that i am trying to keep the loan at a 15 year term

If it’s cash flow negative at $500 but I’m living in it i see it as a win win

Any advice on my outlook?

Ready for my first Buy and hold How would you proceed??

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