Investment options in Houston

[Ben Volkman]

I need some BP knowledge bombs dropped on me here!

If I have 50k to invest in multifamily, then the options are: 

1) 25-30% down on a commercial loan so I'm pretty much maxed out at 150-200k as a total price for anything 5 units and over.

2) 3.5% down on a FHA owner occupied house hack of 4 units. 4-plex FHA loan limit is 636k in Harris county which is plenty for many of the 4 plexes out there. Looks like they are running 80-125k per unit.

3) conventional 20% down for 4 unit which again limits me to about 250k total price

Are there any other options I am missing as far as financing?     I would love to get into a 8-10 unit place but that may have to be down the road based on the above options.

[Sharon Tzib]

Multi-families are mostly an aged product in Houston, since they hardly build them any more. This becomes problematic for FHA loans, and even conventional to some extent, because they have certain condition standards that must be met, and in the under $250K price range, it can be tough to find properties that don't have structural issues, aged systems, and/or safety hazards. Of course, you can get a rehab loan, but the lender criteria becomes even stiffer then. And lenders will also look at you investment experience, so if this is your first rei, I would definitely stick with a 2-4 unit as that will be far easier to qualify for.

I'm not a lender, of course, but these are some of the issues my first-time investor clients have run into trying to house hack and/or buy multis in Houston. It definitely takes a ton of persistence!