New investor, First Purchase. Single-Family or Multifamily homes?

Question

I’ve read a few books, listened to a few podcasts, and have taken a few glances at my local market. Maybe it’s just me overthinking and afraid to pull the trigger (also considering I don’t wanna lose my entire savings) but I’ve thought long and hard about what my first purchase should be. A single family home or multi family home? I live in Los Angeles so any approach is expensive, especially as someone new to real estate. I’ve considered leaving LA but that would mean leaving my job and finding something that may not be as stable. Any thoughts, tips, suggestions?

James McCard · Answer

I can understand investor paralysis - what are you doing now for a living situation? If you can think of it like this:

If you get into a single family house and house hack it and live for free or reduce your cost of living while paying off the property that seems a lot better than paying someone else rent right?

This is even better if you can get into a multifamily with a low down payment and rent the other units out while living in one. If you are renting now and the cost of a mortgage is similar to what rent is and you control the property I would call that a win right?

Investing isn't gambling - you will make mistakes but that is the cost of education - think about how many people pay 100k+ for an education. What is the worst that can happen? You lose your money and start over right? How do you prevent that from happening? Good decisions, running your numbers etc.

Andrew West · Answer

@Joas Espinoza congrats on getting started! As others have said, you seem to be locked into the mindset of needing to be close to your first investment (i.e. investing in LA or moving if you invest elsewhere). This is where a lot of people start because it feels less risky. It's not. What's most risky is buying a bad investment just because it's close to you. Depending on your budget/funding strategy, I would start looking at out-of-state deals in profitable markets and commit to analyzing a few every day. Before long, you'll be familiar with where the numbers really work and what areas are in line with your price point. Then start networking & building a team there!

And please- for the love of all things- don't invest your entire savings into your first deal....or any deal for that matter. Your future self will thank you ;) Good luck!

Joe Norman · Answer

I also would not want to loose my life savings and suggest you don't risk yours either!

As for your initial question, I would personally suggest starting with SFH for your first investment. They are generally easier to finance, and easier to sell retail if you decide to exit.

Lee Ripma · Answer

If you want to invest in LA make sure you understand rent control. Consider going out of stare to invest at a lower price point. You don’t need to live in your investments and you don’t need to live where you invest.

Account Closed · Answer

Hey @Joas Espinoza, congrats on getting started. Others on this thread have given some very solid advice. I'll add a few thoughts:

House hacking might be a good way to get into investing for you, and you might qualify for a low $ down loan to help you do it.

Completely agree with the advice given that you don't need to be close to your investments physically. All of my properties are out of state. It does require a good team to help me manage - but I think physical proximity is a false sense of security - UNLESS you are doing a big rehab; in which case I would want to be present to manage.

My first deal was a SFH, but I quickly realized that to scale and get the cash flow I needed to meet my goals I needed to get into multi. A SFH is a great way to get your feet wet and get comfortable with the experience. Depending on your long term goals and reasons for investing, MFH might be better for you.

Buy for cash flow!!

Happy investing!

Quaid Cde Baca · Answer

@JoasEspinoza absolutely!

Come over sometime and we can go over both our strategies.

Im looking at a MFR next week thats fantastic, but it would drain the bank, and thats just too risky and irresponsible for my taste :\ I'll have to be more creative. I'd like to have 32% cash-invested to feel 'safe' on my first property (thats only because I will make mistakes, and want a cushion to learn on before I tighten my process).

Michael Cardenas bought a could units in Cathsworth and Learn county and growing. Some thought there.

Aj Parikh · Answer

@Joas Espinoza Sure. PM me when you are free. I am always down to talk real estate.

Joas Espinoza · Answer

@Aj Parikh

Would definitely like to connect and talk more about the 2 properties you closed on and how that worked out for you!

Joas Espinoza · Answer

@Quaid Cde Baca

Glad I’m not the only one! Will probably consider out of state since pricing is much friendlier than it is in LA or California for that matter. Wouldn’t mind connecting and analyzing some properties sometime.

Joas Espinoza · Answer

@Carlos Kishek

Hey Carlos, thanks for the advice. I will definitely think hard about investing out of state and will definitely reach out if I decide to do so !

New investor, First Purchase. Single-Family or Multifamily homes?

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