New to This: Is my thinking sound?

Question

Hello,

I've just moved to the Hartford, CT area and am looking to begin investing in real estate. With rent so high, it makes more sense to purchase a house even with insurance, taxes, and other maintenance/upgrade expenses.

I would prefer to find a duplex so that I can live in one half and rent the other. However, it seems those deals are tough to find. So, if I look at single family homes, I would want to buy a fixer-upper and remodel it to increase the home value. Then, in a year or so, rent it out and move to a different home.

Is it that simple or are there other strategies I should consider?

Thanks for any advice or help you can provide!

Jim

Michael Noto · Answer

@Jim Piety You will find as you run your numbers and do your research that the numbers on single family rentals won't work very well for the BRRRR strategy in Hartford County, CT in the good areas.

Assuming living in a safe area with a solid producing property is important to you, house hacking a duplex or triplex is definitely a better option in my opinion. These deals are definitely possible to find, but you just need to make sure you have a solid infrastructure in place before you actively start looking and putting offers in. What do I mean by a solid infrastructure?

The following:

- Are you pre-qualified for financing? Because you need to submit a pre qual letter with any offer. Not having this in place before starting to actively look puts you at a serious disadvantage

- Do you have a good agent? One that has closed multi family deals in Connecticut and can help guide you throughout the process? Not all realtors are created equal, especially when it comes to dealing with multi family homes.

- Do you know the areas you want to live in and what you are willing to and not willing to deal with in a home? As an agent, I need to know what you are looking for and the more general you are with your criteria the harder it is for me to find you something as an agent. At least give me areas you are and aren't willing to live in.  That gives me a good base.

From there it's all about being patient and being ready to pounce once something comes on the market that fits your criteria because you are not the only person looking for the multi family to house hack in the nice area and you can't control that. You can control being one of the first people to view a home after it hits the market and getting an offer in an agents hand minutes after viewing a house if it's the one that checks all the boxes for you.

This is sort of long winded. Hopefully it makes sense!

Mark Nolan · Answer

@Jim Piety

Welcome to Bigger Pockets. Make sure to listen to the podcasts. They are very informative, and contain ample information. https://www.biggerpockets.com/blogs/

Rick Santasiere · Answer

@Jim Piety, @William Collins is referring to the property "class."

Class A: These properties represent the highest quality buildings in their market and area.  They are generally newer properties built within the last 15 years with top amenities, high-income earning tenants and low vacancy rates.  Class A buildings are well located in the market and are typically professionally managed.  Additionally, they typically demand the highest rent with little or no deferred maintenance issues.

Class B:  One step down from Class A, these properties are generally older than Class A, tend to have lower income tenants and may or may not be professionally management.  Rental income is typically lower than Class A along with some deferred maintenance issues.  Mostly, these buildings are well maintained and many investors see this as a “value-add” investment opportunity because through renovation and common area improvements, the property can be upgraded to Class A or a Class B+.  Buyers are generally able to acquire these properties at a higher CAP Rate than a comparable Class A property because these properties are viewed as riskier than Class A.

Class C:  Class C properties are typically more than 20 years old and located in less than desirable locations.  The property is generally in need of renovation, including updating the building infrastructure to bring it up to date.  As a result, Class C buildings tend to have the lowest rental rates in a market with other Class A or Class B properties.  Some Class C properties need significant reposting to get to steady cash flows for investors.

Melissa Gittens · Answer

@Jim Piety I agree with @William Collins find a duplex in a B to A area that offers great rental income potential. I would definitely keep looking until you find what you are looking for. House Hacking is actually how I started my real estate investing journey. I purchased a duplex in Manchester, CT and the rent from one side of my property paid for my mortgage. Once I move hopefully this year I will be able to cash flow since I have made some upgrade to my unit which should increase the rental amount that I receive in comparison to my rented unit.

William Collins · Answer

@Jim Piety  I would highly recommend house hacking in a B to A town duplex to start.  If you looked at say a West Hartford Duplex, the rents are high- ammenties are great ( Blue Back Square), commuting is easy to the Hartford area jobs, and school district is excellent.  It is quite easy to take a duplex and lease out one side on an FHA and break even without house hacking.  If you had a room mate on your side, you could even turn a profit from the get go.

Jay Dewberry · Answer

Hi Jim. Welcome to BP. I will try to come back and elaborate on my post, however here is a quick couple of points. Getting a duplex in order to live in one and rent the other can be a good way to get into investing. It’s the “House Hacking” method talked about widely here on BP. If the duplex deals are hard to find, perhaps marketing for “off-market” deals would help. Using sites like Listsource, you could market to, let’s say, absentee owners in your area and ask them if they are willing to sell their multifamily unit. Many times they become tired landlords and are looking to get the property off their hands. Sometimes, you can get a great deal and nobody knows it’s there, so no competition. As for the SFH, just make sure you perform good analysis using the BP Calculators, so the home won’t become a financial problem in the future. Either way, good luck.

Michael Noto · Answer

@Jim Piety I just sent you a PM with a lender I would recommend.

Jim Piety · Answer

Thanks Michael! That definitely does make sense. I was already getting the notion that SFH are not good investment options here. Taxes are just too damn high!

Anyway, good call on getting financing setup early. Any lenders you would recommend? I will likely do a conventional mortgage with 5% down

New to This: Is my thinking sound?

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