FHA LOAN AND BUYING FIRST MULTIFAMILY AS AN INVESTMENT

[Genesis Pacheco]

Hello BiggerPockets family. So I’m just trying to get as much knowledge as I can and I’ve been learning about your first investment should start with the highest Multifamily which would be a four plex (4units) and of course having to live in one unit for 1year. My question is here in Florida, those type of houses range probably from 400-500k so how can I get a property that will make me profit? Also what about the yearly taxes and insurance how is it possible to make profit when taxes can be as high as $4000 let’s just say. Wouldn’t all the rental income from the other units just be saved up for taxes n maintenance as well? If anyone can please explain what’s the best way to pay mortgage, annual taxes, insurance, maintenance and still make profit after all that? Thank you family

[Dion McNeeley]

I paid $590k, taxes are 6k. Insurance is $2500. I make a profit because these numbers do not matter when looked at by themselves. 

The rents need to make sense. Look at the average rents for the area. If you had to accept 10% less than the average, would there be cash flow? Another way is to contact your housing authority and see what they would pay. They are very transparent and usually have a set amount they pay based on how many bedrooms there are in the unit. The first purchase usually reduces or eliminates your housing costs. Each purchase after that your number of rentals change based on the number of units you buy. If you buy another fourplex you get the three new ones, since you have to live there too. But you also get to rent out the unit you lived in with the last place.

Use a mortgage calculator to determine what PITI will be, I also set aside 10% for repairs and 5% for vacancy. Use that number to compare against the rents for the area. I do this in my state and it is why I go for small multifamily. Single family houses are too expensive to be able to cash flow. With three duplexes one fourplex and one single family house I got before getting into rentals, I cash flow over 5k a month. The first purchase didn't make me FI. It was the first step to get here though. Don't let the big numbers scare you. The tenants pay those costs.

Good luck.