Property Investment and You

As a property investor,

I’m frequently asked for advice about buying rental properties and how to achieve that goal. There are many factors as to how to make this happen, but I’ll focus on the first time buyer that wants to buy a home and then buy another house or duplex as an investment.

To achieve this there are a few ways to go about it. One way is to let the first purchase appreciate through either time or sweat equity and then refinance to pull cash out or take out a home equity loan in order to have funds for the the down payment. This is a very common direction to go and works quite effectively. In fact, this is how I bought my first rental 20 years ago.

Would I do it again?

I would, but I now have an alternative suggestion to buying investment properties and that is to start with the investment as opposed to purchasing a single family home and parlaying it into an investment property. A duplex is the perfect start as you can live in one side and rent out the other. If the right property is identified you may even be cash flow positive from the start, allowing you to grow your cash reserves for a downpayment on the next investment.

I’ve advised multiple clients to follow this path and they have all been grateful of this direction. In one transaction a young couple purchased a nice duplex in need of some cosmetic touches. After spending nearly a year working on their property they decided they didn’t like living in a duplex so after the home improvements they refinanced to pull some cash out and purchased a single family home and kept their duplex as an investment property. I honestly feel they would have never purchased the duplex if they started with a single family home and now they have the potential of 3 rental units.

In another case, I sold my client a duplex, after looking at many single family homes and, instead of parlaying the duplex into another property, he has decided to stay with one investment property and one side of the duplex nearly pays his entire mortgage payment.

So my advice today:

Start with the investment property and when the time is right move into the house of your dreams.

Byron Twyman