Advice on what to do!

[Kyle Kaiser]

I am very determined to begin investing into multi tenant rental properties and would like any mentorship/opinions someone is willing to offer. The pickle: Wife and I HHI is 255K. Easily have about 2-3k per month to invest with. Where do you recommend beginning? How can I secure funding to purchase a 2-4 tenant property? I am not flush with cash so I would love to learn how to access capital for a loan? Would you recommend a traditional investment loan through a bank or private equity? Second problem, we are currently using a VA loan for our house and could rent it out as well. What I would be afraid of is purchasing a new home to live in and only receiving around 1k per month in rental income and then deepening my DTI making it harder to secure a loan for a multi tenant property. Would you recommend buying and renting our current home first or focusing on a multi tenant as it could be a bigger stream of income?

[Josef Hardi]

Hi Kyle, 

I am also a new investor, I'll offer up a couple of thoughts for you:

1. Do you have money to invest in right now? Or are you just starting to save up $2-3k? Regardless, do start to save up. 

2. If you do have some money towards downpayment, perhaps you can consider an FHA loan (3.5% - 10%), but do check if the numbers work out for you. Because remember FHA loans have really high PMIs (our lender quoted about $600/mo PMI for a 800k loan, 3.5% downpayment). Also, not sure about your market, but in So. Cal offers with FHA loans is considered a weaker offer when compared with a conventional 20% offer. You would have to increase your offer price to be more competitive.

3. If you do not have the money towards downpayment, you could always save up until you have enough for an FHA loan or 10-15% at least for conventional loan.

4. I am not sure how much equity you have in your current primary residence. But if it makes sense, you might also try to get a HELOC on it (they typically allow up to 80% LTV). I would only use the HELOC in case there's a great deal and there's an exit strategy to pay off the HELOC in the near future.

5. Keep in mind that the loans for duplex/triplex/fourplex will have a higher interest rate, and higher minimum downpayment.

In short, run the numbers, maybe try to get a pre-approval to get a sense of how much you can purchase. And learn your market, so you know what is a good deal when it presents itself. 

All the best! I can see success in your future :)