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I think buying a single family house as your first home is a mistake.  Yea…I know…this IS what everyone does.  However, if you’re reading this post I assume you plan to lead a different life than the average person. In this post I’m going to tell you why buying a multi-family property is a great idea.  In the end, it will help you become a BALLER.

Why Your First Home Should Be A Multi-Family

    • Save A LOT of money. In a single family home your monthly mortgage + taxes will be $1,500 to $2,500 on average. In a multifamily home your monthly mortgage + taxes, netted with your tenants rent payments, will be something like $500 dollars to $(500) – by negative I mean you will actually receive money each month. In other words, your tenants will be paying for your entire mortgage!  This point is so important I’ll say it one other way.  In essence, you will be paid $500 each month, have a free place to live, and have a valuable real estate investment growing in value for you for free.  Early retirement anyone?

  • Retire early. The earlier you buy real estate the better. Real estate is a fantastic retirement vehicle and having a rentable multi-family in your portfolio will help you retire earlier and/or give you the freedom to take early mini-retirements.
  • Now is the right time. It is really hard to invest in real estate when you are already trying to pay the mortgage on a single family home.  It’s easier to go from buying a multi-family to buying a single-family and extremely difficult the other way around. In addition, home buyers typically are younger (under 35) when they buy their first home.  Their families are less established, they may not even have kids, and they are more flexible with their jobs.  It’s much harder to buy and live in a multifamily property when you have three kids and now is the first time your bringing it up to your spouse.
  • It’s a safe bet. I believe multi-family properties are the safest type of real estate investment. Since the focus is cash flow, not appreciation, it’s resilient against real estate booms and busts. Unlike single family properties, multifamily property’s value is derived as a multiple of the rents generated by the property.  If you have a single family and the market is unfavorable when you want to sell you’ll end up not getting all your money back.
  • It doesn’t cost much to get started. For multifamily properties you plan to live in, you can pay as low as 3.5% of the purchase price as a down payment.  If you already have a single-family and now want to buy a separate multifamily, you will be required to put 40% as a down payment for the multifamily property.  Good luck coming up with $100,000 while paying off your single family mortgage.
  • It’s the best time to learn. Real estate investing, like anything else, takes a lot of learning. In a multi-family property you (the owner) are allowed to live in one of the units and rent the others to tenants. This is the best and easiest way to learn real estate.  If you don’t live in the property you would have to manage it remotely.  Every mistake or issue that comes up will require you to drive over to the property, coordinate with tenants, and try to manage them remotely.

In a soon-to-be-released future post, I will run through the process of how to find a multi-family property and run through the numbers.  I’m already getting excited,

Eric


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