First Fourplex advice

[Justin Rice]

Hello! I am new to this forum and fairly new to the business of real estate investing. The knowledge I have has come from helping my wife obtain her real estate agent licensing, as well as helping her sell her first few homes. Not much experience at all but it allowed me to see the potential of growth from real estate investing. I'm looking for advice on where to begin in this process. 

As of right now I have about 70k equity in my single family home. I'm considering selling and using the equity as down payment for a fourplex so I can begin "house hacking".  On a recent BP podcast. They spoke of being able to purchase land and build for $100/sq ft in my area. Is building to rent actually feasible? If so where is a good place for me to begin? I've started pricing fourplexes in my area so i have an idea of what is in my price range. As long as I can make the numbers work and come ahead with a positive cash flow after all expenses what else do I need to worry about? What should i be reading on? I was also interested in using 1031 on my house. Am i able to use the 1031 and still obtain an fha loan if I plan on living in the fourplex?

[Brad Shepherd]

Congrats and getting ready to dive in. A couple of thoughts, but these are all opinions as will be every other response on this topic, so mash them all together and do what's best for you.

In most good rental markets around the country buying existing properties can be done for less than building new, so there's not much motivation to build. Compare the pricing on both sides, check what the available inventory is, and go from there. Also, it can be easier to get a loan for an existing building as opposed to a construction loan if this is your first real estate endeavor.

Last, would your primary residence make a good rental? If so, hold onto it, and do a HELOC to access the equity to use for your next project.

And no, you can't do a 1031 on your primary residence, but you don't need to. If you've lived in it for at least 2 of the last 5 years, you can sell it and exclude the proceeds from your income calculation, up to $250k of gain, or $500k if married and filing jointly.