Condo and rental property vs. multifamily property

[Brian Tsang]

Hi All,

I am a new investor and have some money saved up that I like to deploy in real estate. I am currently renting and some friends suggest me to start off buying a multifamily property because 1) you get to use the FHA loan and 2) you get to manage your tenants at your fingertips and 3) diversify even if one of your units go vacant.

Before I was planning to buy 1) a condo and 2) a rental property. The condo is for myself and the rental property caters to students where I went to school. I was contemplating this approach because I am very familiar with the rental property area as many of my friends have lived there and I visited that area many times since I graduated (I still live in that city).

I understand it's difficult to analyze a situation given limited info but is there any obvious downside you see in my approach (e.g. need to take out two mortgages?)

Thanks so much for your help.

[Lynn McGeein]

Brian, seems to me like it's more of a choice between higher down payments (low down FHA for the whole thing in a duplex/triplex vs. low down FHA condo + 20% investment down payment the other way), and privacy issues. So, if you are comfortable with both situations financially, it really depends on your priorities, privacy or less money required for investment.

Just my opinion, but I would go with the multifamily FHA and plan to live there at least a year or two, as you can gain landlord experience while purchasing a future investment property for the smallest down payment allowed these days, and if you really decide you don't like the lack of privacy, move out in a year, rent out the whole thing, and find another low down owner-occupied loan. It would be much easier to find a cheap owner-occupied loan than a low-down investment loan later on.