What should be the first real estate investment for under 25 recent college grad

Question

First time investment advice: Should I buy a duplex as my first investment and live in one side and rent other side out, or buy a townhome in a strong college rental community and begin that way???

Kelly N. · Answer

Hi Barshay,
Welcome to BP!

If you can find a duplex, that would be my vote.  You could get FHA financing which means lower down payment and lower interest rate, and live there with either cheap rent or rent free while you save for your next down payment.  Then rinse and repeat!

I wish we'd had the knowledge to start out this way or that young!

Best of luck to you!
Kelly

Eric F. · Answer

Although not a recent college graduate, I am in the same position and am actively looking for a duplex at the moment.

David B. · Answer

My first purchase was a duplex. My very next purchase after that one was a townhouse.  They both were great properties overall.  I would buy both in the same order today for the exact reasons many mentioned above.  My down payment was very low for the duplex which made acquisition costs for the townhouse more feasible. Whatever your decision just go for it.

Nice Investing,

Prashant P. · Answer

I was in the same boat as you a few years ago.  I wanted to buy a mulit family or duplex and my parents wanted me to buy a townhouse/condo.  I ended up listening to my parents since they were helping me with the down payment.

Looking back, I wish I had bought the duplex.  With the low downpayment for first time home buyers I would have been able to buy a decent duplex, live in it for a few years and then rent it out and generate some cash flow.  With the townhouse I had to wait to generate a profit till I moved out.

Brandon Turner · Answer

Hey Barshay Graves-  I love the idea. I started out that way, and my early duplex is one of my favorite properties today. By purchasing a small multifamily, you are able to get in for real low down, with a low interest rate, and keep that property for a long time.

The important thing, though, is being sure to get a great deal so it's worth it!

Be sure to read these posts, they'll help ya!

How to Start Investing In Real Estate at a Young Age

New Investor Strategy: How to Buy Your First Multi-Family Investment Property & Live Rent Free

Hope that helps! And don't forget a photo!

Marc Jolicoeur · Answer

I think either could be a very good idea for a first investment.  As a young person, think about which option will have the lightest maintenance costs and DIY projects over time.  Assuming they each can produce the same cash flow, and a similar ROI,  I would look for the one with less maintenance over time.

One pro for buying a townhome, if its newer construction, is that there is not as much maintenance to worry about. You pay the association fees which is a big cost but most of the big ticket maintenance items should be paid by your association dues.  When a new roof, new siding, new driveway, or new windows are needed, the association will pay for that.   (Make sure the Assn. financials are good)

If its newer construction, you only need to worry about the carpets, walls, fixtures, and appliances.  Water heater and furnace will probably not  ever be an issue if new enough.

In contrast, if you buy a duplex that is a much older building, you can have all sorts of deferred maintenance to worry about.  Grading issues, water leaks in the basement, water dams, leaky roof, drafty windows, boilers, furnaces, garages, retaining walls, sidewalks, failing plumbing, unsafe electrical, peeling paint on siding, etc....

If you can keep the townhouse looking new and trendy for the college kids, it might also be easier to have it rented 100% of the time.

Association fee also covers most of your hazard insurance cost. And city taxes on a townhome tend to be smaller than taxes on duplex with land. Factor in these two cost differences in your Cost Flow analysis.

The Duplex may win out if you can make a higher ROI or cash flow even after factoring in a higher maintenance budget.    Plus, you will need a place to live and you can write off half of the maintenance when you do your taxes.

Good luck.

What should be the first real estate investment for under 25 recent college grad

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