Multi-Family Mania (duplex vs fourplex)

[Nicholas Armstrong]

Okay seasoned investors, I would like to get your $0.02 worth on two properties I have looked at today. But first, let me start by telling you my plan. Please feel free to critique my plan as well. 

Step 1: Purchase a cheaper (50k-145k) multifamily that needs renovating/updating via a 203(k) loan.

Step 2: Occupy the property (house hack)

Step 3: Refinance or pull a HELOC after 6 months to a year

Step 4: Purchase another property or two from the cash of the refinance/HELOC

 @Brandon Turner 's famous BRRR strategy

Multi-family property # 1:

The above duplex was built in the 70's and that was the last time it was updated. Ugly shaggy orange carpet, outdated wallpaper and kitchen. 2Bd + 2Ba. Both units have a nice patio and back porch, as well as a one car garage and separate entrances. This property is in an awesome neighborhood and in a growing city. Schools are scored at a 9 out of 10 and a block from where this house is a SFH sold for just over 250k. The property is minutes from the interstate, Mall and downtown area. This property is Listed for 138K and similar duplexes in the area are renting for $850-$950/Month

Multi-family Property # 2:

This Fourplex was updated about 7 years ago and needs low to moderate renovating/updating. It was built and 1989 and all four units are 2Bd+2Ba. The neighborhood is in the C- range and the schools are rated at a 6 out of 10. Similar apartments are renting at $500+- /Month. This property is listed at 124k

I put all the information into BP's rental property calculator for both properties at listing price and here are the results: (Keep in mind, I am occupying property)

Multi-family # 1: (Needs updating-great neighborhood-great schools)

-$75 Cashflow/month

Multi-family # 2: (Not so great neighborhood-mediocre schools-further from everything)

+$450 Cashflow/month

So given the information above, which is the better deal?

A great duplex in an awesome neighborhood where I know I can get good long term tenants but have a low negative return. Or,

A not so great fourplex in a not so good neighborhood where I may have issues with tenants but have a decent return.

(This would also be my first deal)

Thoughts?