First-time investor/home-buyer looking at buying a multi-family property (duplex preferred) either around Chicago where I currently live or a smaller, but rapidly growing city in Minnesota where I'm from.
If I choose to buy a duplex in the Chicago suburbs, my wife and I would be living in it and renting out the other unit. On the other hand, if I buy a property in Minnesota, I would be renting out all 2-3-4 units and visiting periodically to make renovations or hire someone to manage the property.
I heard somewhere that if you don't live in the property you're renting out, then you have to pay additional taxes on it? What is this called? Also Illinois property taxes are twice as much as Minnesota's (2.3% vs. 1.1%), would not living in our rental property be equivalent to paying extra in Illinois taxes?
Our credit scores are both 700+ and we plan to save up the 20% down payment + closing costs before buying, possibly even borrowing money from friends with an agreement (probably a bad idea, but our friends are the ones interested in our investments).
Our goals are to break-even by renting out the other unit in Chicago or making small cash flow by renting out all units in Minnesota, eventually using cash flow for renovations or another property.
My questions are:
1. Which city is the better choice to buy a property in? We live 5 hours away from my hometown and don't mind driving occasionally to manage.
2. Which 1st-time home buyer programs should we take advantage of? Not looking to put only 3.5% down, but wouldn't mind tax benefits or a lower interest rate.
3. How much should we budget for vacancies, maintenance, and renovations?
4. Is it ever okay to borrow money from friends with a loan agreement?
Thanks for checking out my post, any advice for or against my plans is welcome!