First Rental Property: Single-Family Home vs. Duplex/Triplex/+

[Jacob Shoesmith]

Hello,

Thanks in advance to all answers and help. I joined BP in high school (2014) but since college and my first job, I have slipped away in staying up-to-date. However, at 24 years old (almost 25) and likely to be married over the next two years, I want to begin investing! My girlfriend is very frugal and is 100% behind me in investing in rental properties down the road. She knows I want to have a few properties by the time I am 30 years old.

That being said, I have a few questions:

1. Which comes first: our first house as a marriage or a rental property? (seems like the former is the obvious choice)
2. Single-family home or multi-family property for our first rental? Duplexes sound greta but are hard to come by. I feel like most duplex units for sale are actually only one of the two units, not the whole property. Either I am not looking correctly or they are hard-to-find/all currently owned.
3. Are college areas a good place to start? I know all the pros and cons with college kids since I've read about them and was a renting college student at one point. I feel that properties near college towns always seem to get tenants, no matter what.
4. Living in Houston currently, former Texas A&M Aggie. For my first property it seems best to live close-ish to the property so I can manage it and get it going the first time around. UH is not in a great area of Houston but HBU is. On the other hand, I have always thought of investing in properties in College Station since I am familiar with the area and will likely have Aggie kids attending the school in the future. However, even though it is only 1.5 hours away from Houston, it is still "far" since I am a full-time employee and part-time in grad school.

[Andrew Powers]

Hi Jacob, a big part of my answers to your questions are covered by 3 things: strategy, financing, comfort level. 

-Strategy: is your goal to conserve as much cash up front when purchasing a home or pay it off as much / as quickly as possible? Also are you looking to purchase a home so you can live for free or are you looking for long term appreciation?

-Financing: you can get different loans for different types of properties (unless you plan on cash). Here are some examples of low down payment loans, but investigate more please... Example 1: FHA can cover a single family home or up to a 2 unit home (I believe) with down payment around 3.5% to 5%. Example 2: first time homebuyer conventional loan for single family house allows 3% downpayment.

-Comfort level: do you and your spouse have a minimum level of comfort? Can you purchase a large single family and rent out the rooms while sharing common living areas like kitchen and bathrooms? Or would the requirement be that you have your own living space separate from tenants?

Use the BP calculator to run numbers and be conservative. Know the numbers and be real with them before jumping in on something and hoping it works... also balance this with knowing this is just your first house. There's a lot of learning in just going through the process for the first time.