All Forum Posts by: Matt Davis

 Personally I invest where I live which is the advice I would give to anyone starting out and will be the only way you will be able to get an owner occupied loan unless you were to move.

Matt,

If you purchase the Property under your name, generally, the property policy would be:

1. If you live there:  Homeowners policy

2, If you do not live there:  Dwelling Fire policy

I would review the details of the purchase with your agent and let them know how it will be owned, who will occupy, any business run out of the property, prior losses, etc.  to make sure the above info is correct for your purchase.

 Ok again all great questions, answers are as follows . . .

- Materials that I like are any Bigger Pockets Podcasts, books in the bigger pockets bookstore, maybe start with House Hacking by Craig Curelop, The Multifamily Millionaire by Brandon Turner and The Book on Managing Rentals by Heather and Brandon Turner. 

 - As for duplex vs fourplex, I'm not going to say that economically a 4 unit isn't generally better, its just more. Right now, if you don't have a lot of money saved up and you want to get into the game, you'll be able to get started a little quicker as generally a 2 unit will be less expensive that a 4 unit.  On top of that, a 2 unit is going to be less management intensive which will be a little less stressful in the beginning. You could buy a 2 family, get one unit rented up, and then rent out a bedroom on your side if you wanted to start to hustle it a little more. You'll find a strategy that works for you, just start small, grow, but don't over extend.

 - As for a market, lets say you chose Boston, Ma as a market. Well, there are many 'markets' within the Boston Metropolitan area that are all very different. Demographics are different, housing stock is different, market rate rates will be different and housing prices will be different. If you have an area in mind, just make sure as you zoom in on a neighborhood you choose the one that best fits your criteria.

Hi Matt,

First off I think you have a solid plan in place. As you stated, I would pay off your debt and start savings as you are going to want not just the down payment but also reserves. Having 3 - 6 months of payments in reserve would be ideal at purchase. This will really depend on what you are comfortable with, what your lender will require, and what condition the property is in. If you are having to lease up the property, I would want more reserves than if 3 units are leased for the next 12 months. Finding a 4 unit that cash-flows is pretty tough but not impossible. I would speak with a Lender and find out exactly what type of financing you can get to start. This will help you narrow down the property you are looking for greatly. This will help you answer 1)What type of property you should be looking at 2)What price range you should be looking at 3) What kind of cash flow you need 4)If you need to bring in a partner. And honestly, there is nothing wrong with taking some time to build up your cash while learning more about investing. BP is a great place and I would recommend taking the BP House-Hack Bootcamp. I thought there was a lot of great material and even better connections to make! 

Good luck! 

Matt,

From an insurance perspective:

1. If the 4 family is owner occupied, you can get a Homeowners policy from some companies.  Generally the rates for that policy will be less than a Dwelling Fire (aka Landlord) policy for the House and a Renters policy for your contents. 

2. There are companies that will write a Homeowners for a House in an LLC. Some of those companies will only write it if the LLC members reside there. Because you may have an LLC member that does not reside there it can be an issue with some companies.

I would advise discussing it with several Independent Agents (they represent multiple insurance companies) and see if they could write a homeowners policy in your scenario (4 family, in LLC, with one LLC member not residing there)

Sorry Matt, I just took your first response to be that I was kind of crushing your dreams with all my negatives. And my point was the opposite. Don’t let artificial barriers stop you. 

Matt

Great to hear where you're at, I remember being exactly there.  Your plan is strong. Pay some of that debt down and commit to a weekly spending and saving budget. Getting that in order will be extremely helpful when you start to make up your budget / projections for the rental properties.

A few tips that may be helpful to get you where you want to go (in order) . . .

 - pay that debt down (shouldn't take you more than a month or two) at $50k / year

- Start reading! If that doesn't work, Youtube or BiggerPockets are also great resources. Every book in the Bigger Pockets library is a solid educational starting point. Could maybe sign up for the upcoming Rookie Bootcamp as well?

 - think seriously about that partner, I would want to buy something like this on my own at first rather than going into a partnership, maybe a 2 unit that you live on one side could be better for deal #1

- Pick a market, and then a 'market' in that market. What neighborhood is on the up and up? Then start looking at what homes are closing at per unit. ex Duplex that sells for $100k is $50k per unit. Will help you break down the math of what that two or four unit home may cost.

- From there, talk to some banks and see what they've got for options. Lets just say you go for that 5% down loan. Well, a $200k duplex @ 5% down would require $10k down payment plus some closing costs etc. Lets say the total amount to close was $15k. Have another few months expenses set aside to cover the first few months.

Happy investing !
Jaryn
 

Wasn’t my point at all. If you have enough reserves to feel comfortable in the event a big expense comes up, your lack or capital/net worth just means you have to spend less time and money protecting what you have. 

There’s no good % of asking price, that’s like asking if the shop pays $10,000 for a rose bird, what’s it worth> one thing has nothing to do with the other. 

I evenly offered $385k on a $555k property and I think that might have been too high. On the other hand I have offered doubled the asking price and not gotten the property. (A short sale offered for $105k, I offered $210k and it sold for $249k. Of course it’s worth over $400k today, so who’s the dummy?)

Getting started is half the battle. If you have close friends/relatives/co-workers you might share a house with, you can consider that. That’s how I got started. Bought a house and moved in 3 buddies that paid more than the mortgage and utilities combined. So I lived for free. 

I assume you plan to live in own of the units? (I didn’t see that stated but you mentioned first homeowners loan.) if so…

You don't need an LLC…

1)Any Injury in the property will likely be result in you personally being sued as well. 
2) it sounds like you will have negative equity (assuming 10% selling costs and 10% or less downpayment.)

3) it sounds like you probably have a minimal net worth and are virtually judgement proof. If you do have a net worth of $500k or more buy an umbrella policy to cover you. 
4) I’ve never had a combination home and rental property but usually you want homeowner’s insurance for your home and a landlord policy for your tenant’s property. Then they need to get renters insurance as their personal items aren’t covered by a landlord policy. 

This sounds like a good first step, good luck.