Author Topic: First Real Estate Purchase?  (Read 2311 times)

MountainMan

  • Stubble
  • **
  • Posts: 165
  • Location: Minneapolis
First Real Estate Purchase?
« on: April 10, 2014, 04:16:49 PM »
I realize this question may not be possible.

However, I've been thinking about earmarking about $20,000 from my investments to purchase an initial real estate property. 

What I'm wondering is if it's possible to purchase something like a duplex or four-plex or other kind of plex, live in one unit rent-free or at-cost and cover mortgage and property expenses with the rental income? 

Is there also a way to do this and hire a management company to handle the operations of the property?

Does this sound at all possible?

If not, what would you suggest I do with that $20,000, in terms of real estate?

The aim is several fold:
  • To dramatically reduce my personal housing cost
  • To build equity in real estate instead of renting
  • To use it as a base for more real estate acquisitions
« Last Edit: April 10, 2014, 04:23:48 PM by MountainMan »

richschmidt

  • 5 O'Clock Shadow
  • *
  • Posts: 72
  • Location: Valparaiso, IN
Re: First Real Estate Purchase?
« Reply #1 on: April 10, 2014, 10:36:45 PM »
I realize this question may not be possible.

However, I've been thinking about earmarking about $20,000 from my investments to purchase an initial real estate property. 

What I'm wondering is if it's possible to purchase something like a duplex or four-plex or other kind of plex, live in one unit rent-free or at-cost and cover mortgage and property expenses with the rental income? 

Is there also a way to do this and hire a management company to handle the operations of the property?

Does this sound at all possible?

If not, what would you suggest I do with that $20,000, in terms of real estate?

The aim is several fold:
  • To dramatically reduce my personal housing cost
  • To build equity in real estate instead of renting
  • To use it as a base for more real estate acquisitions

Whether you can find a duplex at the right price point for your $20,000 to help you purchase & prep it is going to depend on your market. I don't know your market or what's available there, but you can find out online fairly easily.

It's definitely possible to have the rent from other units cover all the costs of the building, so that you can live "rent free" in your unit.

However, I'm not sure why you would want to hire a management company to handle the operations. One of the perks of living in the building is that it is dead simple to manage it yourself, since you're right there. That doesn't mean you have to fix everything yourself. You can still hire professional repairmen, etc. But why pay to have someone else manage a property that you live in?  You would have to have a very full/busy life to need that service, I think.

I speak from some personal experience. We have 2 apartments on the top floor of the house my wife and I live in. It's very simple to manage them. We also own 3 single-family houses in our town, two of which are visible from my front porch. The third is about 5 blocks away. I manage them all myself. On average, over the years, the management of each of these properties probably takes less than an hour or two per month. Most of that happens when there's a vacancy, which means that most months they take almost zero time. Five minutes, maybe.

So... that's my input. I look forward to reading the input of others. :)

waltworks

  • Magnum Stache
  • ******
  • Posts: 3400
Re: First Real Estate Purchase?
« Reply #2 on: April 10, 2014, 11:32:53 PM »
Whether or not a multi-family building is a good investment is going to depend on the specific situation you're in and the market/what is available. What you are proposing could be a great plan, or it could be a horrible one, it just depends on the numbers. If you read some of the older threads here or at Biggerpockets.com you'll find a ton of case studies of folks who have done what you want to do.

I will say that if you don't like the idea of being a landlord (for whatever reason) and you want to live in one unit/rent the others that's usually a red flag since it's likely your tenants will figure out what is going on and then you'll end up having to deal with their complaints/problems, management company or no.

-W

I realize this question may not be possible.

However, I've been thinking about earmarking about $20,000 from my investments to purchase an initial real estate property. 

What I'm wondering is if it's possible to purchase something like a duplex or four-plex or other kind of plex, live in one unit rent-free or at-cost and cover mortgage and property expenses with the rental income? 

Is there also a way to do this and hire a management company to handle the operations of the property?

Does this sound at all possible?

If not, what would you suggest I do with that $20,000, in terms of real estate?

The aim is several fold:
  • To dramatically reduce my personal housing cost
  • To build equity in real estate instead of renting
  • To use it as a base for more real estate acquisitions

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28137
  • Age: -999
  • Location: Seattle, WA
Re: First Real Estate Purchase?
« Reply #3 on: April 11, 2014, 06:13:32 AM »
Yes to both - that's completely possible, and common, and you can hire a management company.  The other tenant doesn't need to know you're the owner. 

I would recommend you do it yourself to save the money, but you can absolutely just be another tenant, in the eyes of your neighbor.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

MountainMan

  • Stubble
  • **
  • Posts: 165
  • Location: Minneapolis
Re: First Real Estate Purchase?
« Reply #4 on: April 11, 2014, 09:42:22 AM »
Thanks for the replies!

My reasons for thinking about hiring a management company are:
  • I eventually want to be able to have the freedom to take off and go somewhere without contending with property management
  • I don't want tenants to feel like they can knock on my door any time they want to just because I'm in the building.  I'd rather define specific hours or use a management company.
  • I've got other things on my plate that I'd like to give time priority to.  If there's something like a vacancy that requires a "spot investment" of, say, 30 hours to get filled again, or worse because of repairs, that could throw off the timing of other projects I'm working on.  Maybe it really doesn't have to be that serious an interruption.  I don't think I'd mind if it wasn't that disruptive.
« Last Edit: April 11, 2014, 09:44:23 AM by MountainMan »

dan@themadrealworld

  • 5 O'Clock Shadow
  • *
  • Posts: 27
    • The Mad Real World
Re: First Real Estate Purchase?
« Reply #5 on: April 19, 2014, 09:16:22 PM »
All possible.  You can actually buy up to a 4-unit property with an owner-occupied loan and put as little as 3.5% down.  Great way to get started in RE at a low cost.  Also will probably be a free place to live. I wrote an article on this exact topic.  You can check it out here: http://themadrealworld.com/how-to-get-started-in-real-estate/

I recommend you go through with it.  I wish I got started this same way. You can message me with any questions.