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My relative is considering a home purchase with his new bride. I was thinking that perhaps they should consider anything from a duplex to a fourplex.
I am just starting to educate myself on this. I would appreciate your input on...
* Pros/Cons
* Special considerations for one coming from the world of investing in SFDs
* Property Management Issues
* Security
* Insurance
* Best arguments for and against.
As I emailed him, I started to wonder this would actually be good for us as well, especially if I am not living there.
In a separate thread, I have asked about loans/financing.
I think agent's will become less and less relevant sue to the internet and the increasing sophistication of buyers.
This is especially the case for middle age clients, who have been around the block numerous times and those seeking unique properties.
Unless my kids are buying in a wholly familiar market (like a large farm or ranch) or in a crazy market like NYC where deals are often secret and passed by word of mouth, I would rather them use me as a proxy for an agent than them hire a buyer's agent.
I left a sfh in Las Vegas to a duplex "Villa" here in Missouri. I like it because there is no yard maintainence or snow removal. I am too busy to do a yard, plus I have allergies. I have nice neighbors and only hear their garage door open occasionally. I have speakers in my bathroom ceiling next to the dividing wall and they don't hear it (or at least they don't complain). I like it fine but it is an adjustment from a house. It just doesn't feel as private. However it is very secure. So far it has held its value but I think that is more a reflection of the town as a whole (last year in Forbes top ten in America). The HOA hires the maintainence crews. No rules I can't live with here.
As a single professional it was a no brainer. A con is that a lot of my neighbors are retired. Not exactly a peer group.
I'm not sure if your relative has ever owned properties, so with a 2-4 unit dwelling, besides being a homeowner, he's also the property manager and maintenance person...... so depending on the condition of the property and repairs, he might be getting knocks on his door at all hours, since the tenants know exactly where he lives. He'll also have to deal with all complaints. From a positive side, if he buys the property correctly, the rent from the others unit can possibly cover (or almost cover) the entire mortgage. I'm not sure how easy it is to get a 2-4 unit mortgage these days. I'm assuming the underwriting criteria is much tighter than it used to be.
If he doesn't have any property management or maintenance experience, I'd suggest looking for a new property to avoid alot of issues with repairs. You also want to look for a property with decent soundproofing (if it's possible).
LOL! I expected I would get a response or two like this. But there are far more owners, renters, and confident agents out there on CD than agents not willing to take in the whole of other comments. Besides, CD is a place for thick skin if one is going to throw out opinions.
In fact, you did not paraphrase well, as comments you cite are exactly appropriate. Here I am a fish out of water seeking advice/comments and expertise. Here is where agents have a natural edge. On SFD, that pool thins considerably!
Too bad, since the market of interest happens to be Denver!
I left a sfh in Las Vegas to a duplex "Villa" here in Missouri. I like it because there is no yard maintainence or snow removal. I am too busy to do a yard, plus I have allergies. I have nice neighbors and only hear their garage door open occasionally. I have speakers in my bathroom ceiling next to the dividing wall and they don't hear it (or at least they don't complain). I like it fine but it is an adjustment from a house. It just doesn't feel as private. However it is very secure. So far it has held its value but I think that is more a reflection of the town as a whole (last year in Forbes top ten in America). The HOA hires the maintainence crews. No rules I can't live with here.
As a single professional it was a no brainer. A con is that a lot of my neighbors are retired. Not exactly a peer group.
Hi Photo, I thank you for the response. It does seem that the peer group is an important thing to focus on: multiplexes that will attract the young professional or DINKS looking for ease and convenience....and themselves.
Also from your response--town and location specific to higher income tenants.
HOA being a good thing.
This is one of those projects that funnily enough is becoming as interesting to me as my cousin!
I'm not sure if your relative has ever owned properties, so with a 2-4 unit dwelling, besides being a homeowner, he's also the property manager and maintenance person...... so depending on the condition of the property and repairs, he might be getting knocks on his door at all hours, since the tenants know exactly where he lives. He'll also have to deal with all complaints. From a positive side, if he buys the property correctly, the rent from the others unit can possibly cover (or almost cover) the entire mortgage. I'm not sure how easy it is to get a 2-4 unit mortgage these days. I'm assuming the underwriting criteria is much tighter than it used to be.
If he doesn't have any property management or maintenance experience, I'd suggest looking for a new property to avoid alot of issues with repairs. You also want to look for a property with decent soundproofing (if it's possible).
Good luck
Hi Steve, Thanks for the response. No, he would be a first time buyer. He travels from time to time. Given your comments, it would seem that even if her gets a newer unit, he had best line up his team of maintenance guys so that they are good to go even if he is not around.
Given their tastes and demands on time, I would agree that a new unit would be best. Also, the nature of the tenants would be key. If they rent to people like themselves but a bit younger, it would be ideal.
Mortgage: I would like their credit scores must be great. But from hat I have been reading, that no longer translate automatically to easy lending. I will look into this.
The new property is a great suggestion. I think it works especially well with duplexes, since older ones can look pretty nasty. I would imagine the competition for renters would be with newer townhomes and condos.
Finally, I agree that the soundproofing is a good call. If you have any suggestions on this, I would appreciate your thoughts.
Multifamiliy investing is much better then SFH investing because of economy of scale. Thats my personal opinion. But in this particular case I'd suggest going with SFH unless your relative's wife thinks like a dude. Women want their nest egg, its tough to explain to a woman that it makes sence financially to kind of share your home with tenants behind the wall. I had similar dilema 2 years ago, we ended up buying a SFH, last year I bought a multifamily that I rent out, we do not live there.
Think about bad tenants, they are hard to ger rid off, and his family would have to live with them in the same building.
Multifamiliy investing is much better then SFH investing because of economy of scale. Thats my personal opinion. But in this particular case I'd suggest going with SFH unless your relative's wife thinks like a dude. Women want their nest egg, its tough to explain to a woman that it makes sence financially to kind of share your home with tenants behind the wall. I had similar dilema 2 years ago, we ended up buying a SFH, last year I bought a multifamily that I rent out, we do not live there.
Think about bad tenants, they are hard to ger rid off, and his family would have to live with them in the same building.
Alex79
Hi Alex,
I appreciate this very practical advice. Honestly, I cannot say she is up for it. I think I will run it by her first. If she is up for it apart from her husband;s influence, then I will run thing by him.
Best, S.
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