1 Year Flip, Half of a duplex, or something else?

Question

I'm wanting to move about 30 minutes north to New Braunfels or San Marcos from San Antonio so my soon to be wife can be closer to school. However we will want to move back to San Antonio once she graduates in May of next year.

My dilemma is what I should do for the year we are close to her school.

The thoughts that came to my mind were:

Long term flip: Find a place, fix it up and live in it for a year and then sell it when we are ready to move back. I imagine we would be there less than two years so we wouldn't get a tax break for this strategy.

Duplex or multifamily: Buy a duplex or triplex, rent out the other side, and then when we move, keep it and rent out our side.

Or third: Just buy a good rental and live in it for a year and rent it out once we move.

What would you do?

Also, any San Marcos or New Braunfels locals here that might have some insight into good areas?

Maverick V. · Answer

I would make a muti-family my first choice. The extra unit(s) can be rented out while you are living there to offset your housing expenses. With a single family you won't see a financial benefit until you move out and get it rented.

As far as the long term flip, there are some options but It would be a bit more complicated. A standard FHA loan is pretty strict on property condition, I don't know the exact guidelines (haven't used one) but it is similar to a VA loan (which I have used). The property condition guidelines would make it very difficult to find a property that you could add a significant amount of value to, as the property must be in habitable condition when you purchase it. FHA does have a rehab loan program (FHA 203k) you can read about it here. The biggest problem with this would be the long closing time (typically 60-90 days). I'm not terribly familiar with the New Braunfels market but I would bet you would be hard pressed to find a truly good deal that would accept and offer with a 60-90 day close.

Account Closed · Answer

First you needs to determine your investment philosophy. Then I would buy based on what meets your goals when you move out. That's a great area for college rentals although prices have really increases and ROI has decreased over the last year.  My investment philosophy is high cash flow in growing market so I would choose the duplex up to a fourplex although you should see some nice equity gains in a SFH over the next few years.  Good luck!

Maverick V. · Answer

I don't think the lease option would work out to well. While there is a possibility of working something out, lease options in Texas are a bit more complicated than most other states. Lease options here are primarily only done (legally) by investors. Generally an investor doing lease options here will offer them at, or slightly above market value, with rents slightly above market. The option fees are usually above 3.5% of the purchase price, meaning it would be more out of pocket than going the FHA route. The only way I could see you making money on a (live in) lease option would be to find an off market property and negotiate favorable terms with the owner, then assign the option to someone else when you're ready to move out. If you decided to go this route I would definitely recommend finding someone who is experienced in this field (investor or attorney) and having a long conversation. As always do some searching here on BP and you'll find some great info.

Tyler Wenzel · Answer

Although this is cliche, I'm going to repeat and also say find a great deal on a duplex/tri/quad.  Obviously, if it doesnt cash flow, stay away.  But if you can get free housing for the year, plus some possibly, and then turn around and rent your unit out, that's some serious money you'd save during that year and great cashflow you'd make after.

It sounds like you kind of already have it figured out.  Now just put your efforts into networking and finding that deal!

Good luck! :)

Elizabeth Colegrove · Answer

I am a buy and hold investor who started out by buying a house that we planed to rent out when we left. So I would find the best deal! Duplex or tri-plex is an added bonus because it would help pay your mortgage now!

Shane Wilson · Answer

As long as you can pinpoint what its worth, what it cash flows, and how well the general neighborhood is doing then I wouldn't say anything against buying and holding. The lease option is simply a safe low risk route I wanted to throw out there for you since you were intending to be on the move again within a couple years. Any of the methods will work. It just depends on your goals and what your comfortable with.

I would only give one other piece of advice to tell whoever you rent the other units too if your in a multi-unit and living there as well that you are only a property manager and not the owner. You can then refer to the owner's policies and rules to hold your ground much easier if any issues come up.

Dusty Warner · Answer

I would go for option 1 if I had time to find a great wholesale deal and pay cash.... you would have plenty of time to flip it with minimal monthly expenses.... if you can make money on a flip, sell it.... or just keep it as a rental when you move back

Multifamily is great too.... its always good to have some1 else pay your mortgage!! I would go this route if I qualified for a VA or FHA loan and didn't have a lot of capital saved up... Im currently helping my girlfriend find a multifamily for her first home/investment...

I would only go rental if the other two options were not possible.

I'm new to real estate, so take my advise for what its worth;) Good Luck

Jacob Forbis · Answer

Thanks everyone for the input. I appreciate it.

The only problem now is that my fiance and I have been looking at all the listed duplexes in the area and we haven't seen any that we would want to live in. I don't like to think we are too pretentious, but at the same time I want her to feel safe. We are trying to live affordably while we are there - but we do have some standards.

Part of me is swaying back to the long term flip idea...just because there are some nicer single family houses in our price range.

Anyone that has done the duplex live in one side strategy have problems with the quality of the building/area they live in?

Jacob Forbis · Answer

Hey @Shane Wilson thanks for the input! I hadn't even considered a lease option. I am not very familiar with them.

In my opinion, a duplex wouldn't be too risky. My wife won't be working, so having a tenant pay the majority of the mortgage for the first year of our marriage will be a huge help with the finances.

Also, I think because of the fairly large college (36,000 students) I shouldn't have problems keeping it rented. San Marcos is a 30-40 minute drive from where I am now, and I wouldn't really call it long distance. Heck, it takes me about 30 minutes to get to my rental in San Antonio from where I live now.

Also, I am meeting with some local investors over the next couple of weeks to get some input on good locations - as well as have been driving around several times the past couple of weeks.

I do agree there is some risk in that if I need to sell I could be in a bind. But thats the risk you take with any real estate purchase, and I am ok with it.

I don't know, what do you think? Should I be more cautious?

1 Year Flip, Half of a duplex, or something else?

Most Popular Reply