First time investment

[Isabel Andrade]

Hello BP community members, 

I joined 2 days ago and I’m already learning SO much . I have a first time homebuyer question . 
My husband and I are currently renting but saving up to buy our first home . We are planning to take the FHA loan route since it's only required to put down 3.5 percent of purchase price . We are on the fence on what type of property to buy . If we should get a single family home that is priced within our range while saving up to buy another and rent that one out . Another option that we have seen in our area are single family duplexes which have been priced at about 130,000. Unfortunately, I am unable to move out of the city due to my job requirements.

Basically to some it up , what would be a better investment option in the long run to get us started off ? I know Multi-family is a big starter but our options are a bit limited in that area . Thank you ! 

[Harjeet Bhatti]

@Isabel Andrade You can buy duplex under IHDA program. IHDA can be combined with other down payment assistance program.  

[Brett Deas]

Have you thought about house hacking a single family? I don't know your situation but I would look into making the basement a separate unit and renting it out. I think a Duplex would also not be a bad idea, but from what I see typically duplex's are more expensive. If you would be going to the top of your budget I would recommend house hacking the single family. 

[Isabel Andrade]

@Harjeet Bhatti 

How are the interest rates typically with that program ? 

[Isabel Andrade]

@Brett Deas

That’s actually a great idea! But with that how would splitting up the utilities happen ? Adding into the rent I would think would be the best deal ? 

[Harjeet Bhatti]

@Isabel Andrade The interest rate is available online on their website. 

[John Mathew]

Hello Isablel, Here's my advice and I hope it helps you. 

Invest in Single-Family Homes if….

• Your primary goal is appreciation
• You want longer-term, stable tenants
• You want an asset that’s more liquid

Invest in Small Multi-Family Properties if…

• Your primary goal is cash flow
• You want to scale your portfolio quickly –
• You’re willing to contend with more turnover risk and liability risk

In general, single-family homes tend to appreciate better than multifamily properties. The prices of single-family homes are driven by comps, and most homes are sold to owner occupants who are going to live there.Single-family homes offer more price appreciation and longer term equity growth.

[Brett Deas]

Quote from @Isabel Andrade:

@Brett Deas

That’s actually a great idea! But with that how would splitting up the utilities happen ? Adding into the rent I would think would be the best deal ? 

 That depends on how you want to rent it. For short to mid-term rentals I would just eat the cost because no one wants to pay for utilities. If you are long-term renting it I would reach out to your utility provider and ask for the steps required to get the separate meter as I do not know. 

[Jewel B.]

Quote from @Brett Deas:

Have you thought about house hacking a single family? I don't know your situation but I would look into making the basement a separate unit and renting it out. I think a Duplex would also not be a bad idea, but from what I see typically duplex's are more expensive. If you would be going to the top of your budget I would recommend house hacking the single family. 

 How do you find out the legalities or practicalities of converting a basement to a rental? Or of splitting a house into two units?

[Brett Deas]

Quote from @Jewel B.:

Quote from @Brett Deas:

Have you thought about house hacking a single family? I don't know your situation but I would look into making the basement a separate unit and renting it out. I think a Duplex would also not be a bad idea, but from what I see typically duplex's are more expensive. If you would be going to the top of your budget I would recommend house hacking the single family. 

 How do you find out the legalities or practicalities of converting a basement to a rental? Or of splitting a house into two units?

Legalities go just look it up in your HOA, city, county, then state. If you go through that then you should have your answer. Or look up owner occupied rental and that will probably tell you. Splitting a house in two is a little more tricky and I would ask someone in your area who has done it before because it differs too much even state by state. 

[Nate Sanow]

@Isabel Andrade congrats to you on your decision to invest, and props to you for seeing your first owner occupant loan as an investment. IT SHOULD BE!!! So you are going to be off to a great start just by doing that. My quick vote is a duplex. If you can make sure that you run the numbers both on the cash flow from the other side while you live in one side, and, if you will collect enough in rent to offset the mortgage upon move out, then it is to me a wise idea. Lenders will see the rental income as a credit on DTI, if your plan is to rinse and repeat in a year or two.