What is the best way to start

Question

Hi,

I am a new real estate investor.  I want to know what is the best way to start investing in real estate, particularly in multi-unit properties.  I am looking for good residual income and appreciation.  Thank you.

Aaron Montague · Answer

@Helen Kolton

I recommend buying a 3 or 4 family house to live in.  You should be able to eliminate any sort of mortgage or rent payment you have with the right deal.

Q: I like the concept of MFH investing, where should I start?

Short Response:

1. Eliminate your rent payment 
	2. Bring all deals to the BP community (and be humble when doing so) 
	3. Stick to the returns you want

Long Response: 
	Learn everything you can about multi family investing. Every day you should answer a few questions and write down several new ones.

The general theory is that you need to drive costs out of your life and/or add new revenue. If you live with your parents, and they don't charge you rent, good. I'd then start forcing yourself to put $500-700 away each month as a "rental" payment towards some real estate.

If you pay rent of any kind, to your folks or to another landlord, find a way to eliminate it from your life. My suggestion is to find a 3 or 4 family property that you can purchase. FHA loans are a good way to go, but be wary of the additional percentage points you have to pay each month as PMI. VA loans are even better, but require you to have served in the US military.

Run every deal you find through the BP community. Some of the responses are harsh, but they are eye opening. There are people on this site that have been buying and selling 4x as long as I have. When I find answers to my daily questions, I can almost always find the answers here at BP.

Last one for the moment: stick to your numbers. It bears repeating: stick to your numbers. If you want $200/month and a 12% Cash on Cash return for your investment, stick to that number. If you pick 12%, 9% is not good enough, nor is 11.7%. Make your offers accordingly.

Here are several inexpensive ways to get into the landlord business:

0% Down:
	NACA (https://www.naca.com)
	VA Loan (http://benefits.va.gov/HOMELOANS/index.asp)

3.5% Down
	FHA (http://portal.hud.gov/hudportal/HUD?src=/topics/buying_a_home)
	
	3.5% AND Renovations
	FHA 203k loan (http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203kabou)

5% Down
	Homepath Owner Occupied

Not as cheap, but come with renovation options attached to the loan:
	10% Down
	Homepath Investment (SFH only)

20% Down
	Homepath Investment (Duplex only)

25% Down
	Homepath Investment (3-4 Unit Buildings)

Auxiliary:

http://203kcontractors.com/

Andrew Syrios · Answer

Aaron is right, buying a fourplex with an FHA loan is a great way to start, especially in buy and hold.

Aaron Montague · Answer

@Helen Kolton

Are we talking about 17 Water St in 08882 (South River Boro)?

17 Water St on Realtor.com

If not, what are we looking at?  A Duplex or a 3-family?

Helen Kolton · Answer

Aaron,

I need second look at my preliminary number if its ok with you.

It is very hard to come up with good comps for this property.  Its a short sale, bank wants 200K, the owner paid 183K in 2005, missed 3 last payments.  The house next door sold for 100K.  the comps I came up with are from 100-179 within 1 mile radios. My offer to the bank is $120 or $125K.  The rentals go for 1,000 to 1,200 /mo.  Cap rate is around 12% or better.

Your thoughts please.  I appreciate everyone's input.  I am working on pre qual ltr so i can submit my offer.

Thanks everyone.

Helen Kolton · Answer

Hi Erin,

Thank you for replying.  My ex used to be in the military.  Unfortunately I am not qualified for VA but I am looking for muli, 2 or 3 units.  I was thinking about it for a while until Aaron confirmed my decision making process.  That is exactly what we want to do.

I am so looking forward to start.  Please keep in touch and good luck to you guys.

Erin L. · Answer

I am so new here I haven't had the chance to introduce myself yet but Aaron's reply has me saying "Yes!"  Exactly what we did before we even knew we wanted to start taking the investment property thing seriously.  We purchased a duplex that needed a good deal of upgrading and repairs but was livable on a VA Loan (husband is active duty).  Within 2 months of working just nights and weekends we were able to rent out one side to pay the mortgage on the whole property.  Living in your multifamily is a great way to get a head start on saving for your next one while learning a lot.  Bonus is that you save on maintenance and other things by just being on-site.  Tenants don't generally trash property when the owner lives there.  If this idea sits well with you, it's a great way to get started.  We are looking at doing it again in the MD area when we transfer with the military.

Aaron Montague · Answer

@Helen Kolton

I have no clue what this area is like, but this one looks like a GREAT place to start:

South River Boro 3 Family <-- rentometer has average rents @ $1400/month for 3 bedroom places

Rentometer

Helen Kolton · Answer

Aaron,

I will research it on citi-data.com, i am familiar with that area. Thank you.

Just called my realtor re: multi.

Mindy Jensen · Answer

Helen,

I agree with Aaron. He has given you great advice. Most BP responders will be honest, but not mean. If you are really looking for advice, listen to them because they will not steer you wrong.

BP has a great podcast where they interview a lender, who tells about how his lending institution reviews the property to determine if they will make the loan. Very interesting. Of course, I can't remember what podcast number it is. Sorry. Maybe someone else knows?

Good luck!

Helen Kolton · Answer

Aaron thanks a million.  I will research this information.  I was looking for 2 to 4 multi but have not considered living in it.  Saving on rent is something I have not thought of.  But now since you brought out to light i see there is a good point.  I appreciate your advise.

What is the best way to start

Most Popular Reply