New Member in Huntsville, AL

[Will Godsey]

Hello everyone,

I have recently moved to Huntsville, AL. After a couple months of research and listening to the BP podcast daily, I am looking to invest (house-hack) in a duplex, triplex, quad within the next 6-8 months. A little background so I can help you understand my situation: I am a single 25 year old without any kids so I am flexible on my living arrangement and plan to live in one of the units. I have a steady profession with a good salary so I am just looking to increase and diversify my cash flow. I am currently renting and do not have any current debt other than a car payment.

I have a family member who is a successful residential construction company owner. He has mentioned multiple times that he would be willing to invest in property with me. My options that I am currently weighing are:

1.) Invest by myself and get an FHA loan with 3.5% down. I would lean more towards a duplex. I have never been a landlord or homeowner so I am a little nervous about going ahead and jumping into a 3 or 4 unit building.

2.) Go into a partnership with my family member with a 50/50 split. Get a conventional loan with 25% down. In this situation I would lean more towards a 4-unit complex since it should cash flow a little more if we can find the right deal. The key benefit in this is that I would have a partner that is experienced in real estate and would know what to look for and who to contact to get the process going and when issues arise. My family member does not live in Huntsville, but is close enough to where he could drive to the location within a few hours.

Any thoughts/opinions on either route? Also, what do you think the pros/cons of buying a turnkey muli-family vs. a rehab? I look forward to connecting with many of you on here.

Thank you,

Will Godsey

[Jared Garfield]

Will, 

I will be in Huntsville this Saturday and we buy 10-15 per month in that market. We are glad to network and help you hit your goals. Going FHA with the low down payment is a great option, for one it helps you build your credit, and secondly your returns will be incredibly good!

There isn't a whole lot of difference between having a duplex or fourplex if the properties don't have deferred maintenance.  Bigger property means bigger roofs, 4 furnaces and condensing units, 4 fridges, stoves, dishwashers etc.  So if something goes wrong on a fourplex you would need more repair reserves, but much of that can be controlled by buying something that is in really good shape and getting a list of all of the renovations that have been done up front.  Provided the deal is good enough,  you might want to get the owner to replaced deferred maintenance items as a condition to the sale.

In either instance, duplex or fourplex, I would have a property manager manage the units that you don't live in.  For 8.5-10% of the rental income it's well worth not having your tenants know where you live or know that you are the owner.  (Think about the knocks on  your door at midnight because someone has clogged the commode).

I've seen foreclosed fourplexes in Huntsville in the $85,000 range, but they are often in neighborhoods that are a little tough crime wise.  Typically if you are in a neighborhood of duplexes or fourplexes, it won't be as nice as one that is built off by itself (which zoning doesn't often allow).

Consider also 1970's brick ranches with basement apartments, where zoning and ordinances don't mandate that the person living in the apartment has to be related?  That can be a great way to accomplish the same thing while getting into a much better area that has better appreciation and lower crime.

I'm open to helping any way that I can, so feel free to connect.