Quote from @Emily Wolters:
Quote from @James Wilcox:
Quote from @Emily Wolters:
Me 21 and my husband 24 are looking to start investing in multi family, our plan is to buy 3 or 4 unit properties, live in one unit and rent out the others one year at a time until we have a cash flow good enough to quit our jobs and have children. I’m just looking for tips from people that have kinda been in my same situation and might have some advice for us. Thank you!
Some good advice on this forum for you . HH is the one if not the best way to get started. Although 3/4 units sounds good and best on paper in reality it can be tougher to pull off. Likewise, please don't rule out SFH used as a HH or being more creative in your approach. HH isn't just MFH properties.
Thank you! That is incredibly helpful. Like you just said it looks good on paper and it seems the most ideal although I don't understand how it is difficult, could you maybe expand on that?
Certainly. This is merely a general outline indicating that while multi-family homes (MFH) may seem promising on paper, their practicality might not always match up to expectations.
1.) Financial: @Brittany Minocchi mentioned this briefly before so I want to give her credit. Essentially, it might be more challenging to tackle bigger deals, depending on your own financial circumstances. I agree with her suggestion about duplexes if that's the path does include MFH. Ultimately, it boils down to your own comfort level with risk tolerance though.
2.) Liability & Headache: When you squeeze more individuals into one space, you're likely to encounter a range of issues. Firstly, there's the heightened risk of property damage due to increased wear and tear. Additionally, a higher occupancy often translates to more frequent disputes among tenants. Whether it's disagreements over shared spaces, noise complaints, or differing lifestyles, the likelihood of conflicts arising increases with the number of occupants. If you live at the property you will be also directly dealing with those issues. MFH demands more attention, time, and resources to address the various issues.
3.) Supply: The availability of MFH is considerably lower compared to SFH, which can pose a significant challenge when searching for the "perfect" property, especially when personal needs come into play. Additionally, you'll need to locate a property with either a vacant unit or a shorter lease that could be canceled, allowing you to occupy a unit as your primary residence, as required by the terms of your low down payment loan. Add on top of that others are also trying to find that House Hack and there is competition for properties that meet that criteria. Finding an MFH that meets all these criteria together can be exceedingly difficult, if not nearly impossible. Although, waiting on the sidelines in pursuit of the ideal property only worsens your long-term prospects for embarking on your wealth-building journey through real estate.
4.) Exit Strategy: MFH can present challenges when it comes to selling compared to SFHs. Since MFHs are primarily targeted towards investors, this narrows down the potential pool of buyers. Moreover, if your asking price doesn't align with the property's financials, it can stall the selling process. Investors tend to be more discerning and astute, meaning they'll closely scrutinize every aspect of the deal. They'll likely negotiate more aggressively and haggle over every detail right up to the closing. So, be prepared for a more rigorous selling process with less room for concessions.
Certainly, there are numerous benefits to house hacking a MFH property that outshine SFH. Ultimately, if you come across an MFH with a vacant unit that suits your needs for residency, it's definitely worth considering and I encourage you not to hesitate. Enduring this arrangement for just a year or two can position you favorably to replicate the process and gradually build a substantial portfolio of properties just from the HH method alone.
