First Investment Property

[Ian Boyle]

Hello! I was seeing if anyone could give me some advice. I’m moving to Brevard County area in Florida soon and I’m trying to purchase my first investment property, actually first property ever. I’m in the military and am looking for a duplex, triplex or quadplex to live in one unit and rent out the rest. Here is my scenario: I found a quadplex that I like, about 370k, each unit already has tenants and each unit rents for about 750 each. 3 units are 2BR/1bath and one is 2br/2bath. I looked at the exterior the other day and it most likely is going to need a new roof soon, also the exterior could use a new paint job but nothing too terrible. If I do 15% down, me living in one unit would have me homestead the property and reduce the property tax, with the impending roof payment, how good or bad of a deal is this? One thing to also consider in this is the housing allowance received due to being in the military which is an extra income.If I left out any information you guys need to help me, please let me know. If I include the housing allowance my ROI is still very high and it just seems too good to be true. Please poke holes in this. Thank you for your time!

[Michael Cross]

Ian,

That's awesome that you are finding some good options in your area to house hack. 

Are the rents below market rate? a good general rule of thumb is the 1% rule. If your total monthly rents $750 x4 = $3000 are 1% of the purchase price then general its a good starting place to evaluate a property so you will cover your costs. At current rents to purchase price you are at .81%. If your rents are way under market value and your property manager says they should be $900-1000 then the numbers work a whole lot better on this deal. If your rents are at market rate then you might want to find something where the numbers are a little better.

Also, what are the comps to your quadplex selling at? Your realtor can tell you. If you get a quote on the roof and the comps support your purchase price + the repairs with a little bit more wiggle room in the budget for an unexpected repair or expense then your deal is likely a good start. Be sure to get a home inspection and have any question areas from the inspection checked out by a contractor.

As for financing the deal, have you already used your VA loan? a 4plex still qualifies for your VA loan. Also, would you downpayment tap you out cash wise? Any property is going to need repairs at times so don't go into this deal cash poor or when problems arise you will stress out more than necessary.

With your military schedule are you planning to self manage the other tenants? I would not have been able to when i was in the military. Ask your realtor, friends, contractors etc for property management recommendations if you go that route. If you hear a common theme for several property managers then those are likely the ones you want to interview.