Multi-unit property investor

[George Barboza]

I would love to start diving into the wonder world of Rental property investing but I am mot too sure how to start my approach. I live in Colorado where its hard to start if you have little to no money, because of how expensive it is. I am currently paying very little to no rent and starting to save for my first property; I am wondering how I should approach my first property. I have thought of using FHA loan to get my start up, upside I can start with a 3.5% down, downside I have to live in the property for a year which cuts down revenue, and its only up to 4 units. I could use a conventional loan for a property with practically any units id like, but it would require a 25-30% Down. The property would also be more expensive which would require a larger down pmt, and It would take longer to get into this business. Any advise as to which direction I should take?

Should I do the FHA loan, start small, live in the property, just to get started ?

Or should I be patient and save for a bigger property with more units, even though id take a lot longer ?

Im thinking of long term investing. I just do not want to wait too long. But also do not want to rush into it and fail.

[Jaysen Medhurst]

House hacking a MFR is a great way to get started, @George Barboza. You will lower your living expenses, build equity, and gain experience as a land lord. Go in with your eyes open, though. In an expensive market and with high leverage properties may not cash flow after you move out. You have to run the numbers both ways (with you living there and after you leave) so you know what you're getting into.

A point of clarification: you cannot "use a conventional loan for a property with practically any units." Conventional loans are only for 1-4 unit properties. Once you go 5+, you must use a commercial loan. Commercial loans typically require 20-25% down and have less favorable terms.

Finally, if you qualify, I highly recommend using a low-down payment conventional loan for a owner-occupied property, no FHA. There will be less paperwork, no up-front PMI, and monthly PMI goes away once you hit 78-80% LTV.