Bought A Owner Occupied Duplex, Now What?

Question

Hi,

Just want to say that Bigger Pockets have been such a great resource for me as a new investor. I've read a lot of forums and I'm almost finished with Brandon Turner's No Money Down book.

I bought a Owner occupied duplex  in Broward County Fl almost a year ago using FHA. I live in one Side obviously. Based on recent sales in the area, I've estimated that my property value went up about $58,000.

I would like to buy a second Property but I don't have much money. What would be the next move? Based on Brandon's book, I'm thinking I could do a home equity line of credit for a down payment. However, I went to my step moms old bank (she used to be in banking) and they stated I'm eligible for only $16 to $17k don't think that will go very far in Broward. Any other options for me? I want to buy another duplex. Should I wait a little longer? Buy a condo? Help!

Lastly, I LOVE investing and would love a mentor or networking event. Anything in Broward?

Tony Georgiev · Answer

Congrats! That is the way to go!

Did you refinance? If a full year has passed since  the purchase, try to refinance, get the accumulated equity out to use as an FHA down payment on the next duplex (you can have only one FHA loan at a time).

I would not advise on getting a condo - potential special assessments, HOA fees rising can quickly kill your income.

Where is your duplex? How big is it? What did you pay for it a year ago?

Let me know if I can be of help finding your next multifamily investment property.

Jeff Wallenius · Answer

@Jheanell Rodney first of all, congrats on your first purchase! How about you rent the side you live in now and go out and find another owner occupied duplex and start the process over again? This will allow you a smaller down payment that may get you into the next property.

Adam Schooley · Answer

@Jheanell Rodney you're on the right track! @Tony Georgiev is right on point with his advice.  You would want to refinance into a conventional loan so that you could do another FHA loan at 3.5% down. I would just caution you to make sure your numbers still work on your first duplex as your mortgage will be larger, interest rates have gone up a bit, and you will lose your homestead exemption on your first duplex when you move to your new duplex.

Jheanell R. · Answer

Hi Guys,

Thank you so much everyone for your input, it's been a big help. I've been thinking (and researching) and thought that my next move should be to refinance this duplex to a conventional and then buy another multifamily using FHA again. I would live in it of course. Do you all forsee any issues with this? FHA allows a second loan if the first is paid off right? I'd still get the 3.25% down option right? That would mean little money down and still receiving income from first property to cover any loose ends. I value all of your opinions and expertise.

Jeff Garzik · Answer

1- Have you run the numbers for a cash out refinance, using current comps as you describe?  If you can get a HELOC, you might be able to cash out.  No ongoing interest payments with cash-out; just a one time transaction bite (closing costs), plus the mortgage you were already paying.

2- In terms of risk, advice to a conservative landlord would be to build your emergency fund cash reserves first (personal + duplex), and then build some funds to buy another property.

3- I tend to agree with some of the BP podcast guests:  Flipping is the easiest way to generate cash, when you're young and cash-poor.  Get good comps for ARV, get multiple repair estimates/bids from GCs, and use a hard money lender who will lend 90% LTV + 100% rehab.  Go slow for your first, ask BP community for help, look around for area wholesalers who specialize in finding properties in need of rehabbing. And never ever buy if the numbers don't work; leave emotion at the sports stadium :)

Once you have sufficient cash, you can get the BRRRR train rolling and cycle that cash in & out of buy-and-hold properties and refinancing.

Michael Henry · Answer

@Jheanell Rodney How much are houses/duplexes for sale near you or where you would move to? Go bank to the bank and ask to get preapproved for a mortgage, take into account the debt of $17k and without the debt amount; your mortgage amount will change based on these to two situations.

You might want to look into buying something with hard or private money and doing a cash out refinance after 6 months or less.

Bought A Owner Occupied Duplex, Now What?

Most Popular Reply