One of the popular methods of getting started in real estate is called “house hacking”, a term popularized on the investor website Bigger Pockets – buying the home to live in for a couple years while the other tenants pay for your mortgage.
The Fort Hood area multi-families are predominantly fourplexes and duplexes. There are very few triplexes, townhomes, or condos.
Fourplexes For Sale
Duplexes For Sale
Buying a Multi-Family Owner Occupied
A duplex is probably no one’s idea of a dream home, so why would you purchase one to live in? For mostly the same reason as your tenants – it meets your current needs in a home. The advantage of buying a duplex over a single family home, however, is that you also get paid to own your home. Paid in “rent”.
Example. The mortgage payment might be $1200/mo. One side may rent for $850. That means the owner could live in one side, only paying $350/mo ($1200 – $850). Even after taking into account vacancy (10%), maintenance (10%) and management (10%), that is still owning a home for $605/mo ($1200-$850*0.7) what you’d pay $850/mo in rent for. Fourplexes are even more advantageous.
|You can buy multi-family homes with up to 4 units without having to use commercial lending. That means that you can buy a fourplex as your own home, just like you would any other home, using VA, FHA or any traditional type of financing.||If buying a multi-family with owner occupant loans, you have to live in it! Depending on you and your family's needs, it may accommodate you, or may not.|
|When you're done living in it, move out and you now have a full rental property investment on a great loan! Passive income, at that – the best retirement account.||There are fewer choices in the Fort Hood area – none with four bedroom units, for example, or in certain school districts.|
|For owner occupants, the rent from the additional units can help offset the mortgage, or, especially if fully rented, pay for the mortgage completely.||There are not often (anymore) distressed multi-family owners in the Fort Hood market, ever since the market rebounded from the 2010 lows. Sellers are not motivated, and most buyers can expect to pay full market price, more often than not. Doesn't mean it's not a deal!|
|Multi-family rentals benefit from the economies of scale, tending to have higher returns than single family rentals – the more units the better! In fact, the 'big' investors often eventually upgrade from 4 unit fourplexes to apartments with many units.||Multi-family rentals are more likely to have higher tenant turnover, as few rent a fourplex or duplex with designs of staying in the area long (probably no longer than their 3-5 year station at Ft. Hood. True of all rentals in an Army town, but multi-families especially.|
My Advice on Multi-Family Homes
- Use a property manager. This advice applies to any investor with any investment. Don’t plan on doing it yourself. Why not? I assume if you are buying rentals, it is not because you want to be 70 years old managing rentals. You want financial freedom. You are going to use a property manager eventually, anyway. Budget for one now. Find a good one now. The other reason is that property management is not likely your most dollar productive activity. Hand off the menial stuff for a reasonable 10%
- Buy fourplexes whose units rent for at least $500 ea., Duplexes at least $700 ea. Multi-families can become very big headaches compared to single families. You get more income relative your costs, but also 1-4 more people to manage, higher turnover (most people don’t want to live in a fourplex forever), and it can be more difficult to find highly qualified tenants with good credit Also, the best property managers often refuse to manage units that rent under a certain amount.
- Get 3 bedroom units. Few fourplexes have all three bedroom units, but many have at least two units with three bedrooms. When I managed my own fourplex, I would get calls from my For Rent sign. The first question was always “how many bedrooms”. If it was only two, I would usually hear “Thanks, *click*”. Three bedrooms just rent better in the Killeen area. (Related – I would never, ever, never buy a single family with two bedrooms in the Killeen area. Never.)
The Most Recent Posts about Fourplexes/Duplexes from the Hood Homes Blog
September 20, 2018
January 30, 2018
October 31, 2017
September 28, 2017
February 18, 2017
February 9, 2017
October 15, 2016
July 10, 2016
June 10, 2016
February 16, 2016