What are your thoughts on the feasibility of building wealth through duplexes, triplexes, and quadplexes? Is this a legitimate strategy from your experience, or does the required maintenance overtake any income you may initially make?
I see the main benefit being that you can get FHA financing if you live there for one year.
I see the costs being:
In order to do a second FHA deal, you have to refinance it with a conventional mortgage first.
It has to be in your name to do this and you can typically expand to having only 10 mortgages.
Yes you can build wealth. There's plenty of mom and pop investors out their who are making a pretty good living off of them. Will you become the next Sam Zell? No, but you can do well for yourself. I plan to invest in a 2-4 multi soon and live in it.
I would say the clear cut number one skill to have to become a successful small investor is to understand expense budgeting. No complex modeling needed. Ability to understand and budget shit breaking and having capital for It is by far most important.
It's a good start. I don't know a ton about resi lending, but eventually even FNMA conventional loans have a problem with investors, right?
From the research I've done it seems like you can't go past 10 conventional loans in your own name. So using 4 unit buildings, the limit would be 40 units.
Using an FHA loan to buy a multi unit property and live in one unit seems like a well-beaten path. I think the biggest things you need to be prepared for are being tied down and tenant bullshit that you'll likely want to deal with yourself to save money.
I'm not sure I'd be worried about a conventional mortgage limit. Hopefully by the time you're reaching that barrier you're ready to start diversifying / using commercial mortgages.
My plan would be to move into commercial mortgages for larger projects before I hit that limit, and I imagine that I wouldn't use the 2-4 unit strategy for more than 10 years.
Yes I know of a lot of people that do this, that being said, 2-4 plexes are the toughest part of the market to deal with due to limited economies of scale. My goal would be to get the ball rolling with this and then transition to larger and larger deals. Try and use the extra cash flow to buy down debt and then after 5-20 years, 1031 out of these and use them as a down payments for 15-100 unit buildings.
Hic est et nihil quae accusantium. Odit omnis praesentium qui. Iure delectus nulla asperiores amet ex quidem provident. Quo nostrum deleniti commodi.
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