July 17, 2020 – Should Your First Investment Be Single-family Or Multi-family?

QUOTE OF THE WEEK

“In order to do something you’ve never done, you have to become someone you’ve never been.”  Les Brown

Hi Readers!

First, I’m excited to announce that we have a new team member at Rock The Real Estate! We’d like to welcome, Jill Jenkins, our new Chief Operating Officer (COO) to the team! Jill is a business leader and strategist who has had lots of success building her own companies, as well as others, and we are very happy to have her on board!

I’m also excited about the topic we’re covering this week, single-family vs multi-family as your first investment, because it is an important first step in building your real estate investing career. What I find interesting is investors are split down the middle on this one. Half feel you should start small with single-family homes, whether you’re flipping or planning to keep them as rentals, and the other half feels you shouldn’t waste your time doing one house at a time and, you should jump straight into multi-family investing.

I am interviewing a seasoned investor who has a very definite opinion on this subject and has built his real estate career doing what he preaches. So, you’re want to read that.

And, as I try to do in every edition, I have a few words of inspiration for you in the Manifestation Corner this week and last, but not least, we’ve got some additional articles under Suggested Materials on single family vs multi-family that might shed even more light on which one of these strategies might be best for you.

So, I hope you’re ready because we are about to…

ROCK THE REAL ESTATE!

Lena W. Claybon
Co-Founder/CEO

Feature Story

Should Your First Investment be Single-Family or Multi-Family?


I know investors differ on this subject but for me, there is no right or wrong answer here.  It depends on so many different factors like who you are and what you’re trying to do in real estate.  What is your risk tolerance?  Where are you financially?  Are you planning to live in the dwelling while fixing it up?  That could work well with a duplex or triplex but investors do it with single-family homes as well.  Are you flipping or wanting to purchase rental properties?  These are just some of the things you will have to think about in making that decision.

So, today we’ll be discussing this with my guest, Mark Warlick, who’’s been a real estate investor for over 30 years and has done both single-family and multi-family investing.  Mark has some juicy little tidbits of information on the subject that I think you’ll enjoy.

So without further adieu, check it out.

INTERVIEW WITH INVESTOR MARK WARLICK


Lena:  Hi Mark, thank you for being a part of our newsletter this week.  I really appreciate it!

Mark:  My pleasure, thank you for inviting me.

Lena:  So, let’s get right to it.  First, tell the readers about your background in real estate investing.

Mark:  Well, let’s see, I went to college and graduate school, graduated with a Masters in Engineering and about four months out of school, I bought my first house.  Then —

Lena (interjecting):  Was this your primary home or an investment property?

Mark:  It was my primary home with the thought of it becoming an investment property later.  So, then, about a year or two later, I bought another home [investment property], then I got married and bought another one.

Lena:  These were all single-family homes?

Mark:   With the last two, one was a single-family and one was a condo/townhouse.  So, I got a new job and moved to Colorado Springs (from Phoenix) where I bought another home.  So, we had 3 rentals by then and just built up from there.

Lena:  So, when did you transition to multi-family?

Mark:  After a few years of living in Colorado, we moved to Los Angeles where I bought my first triplex.  So, the interesting thing about that was, I had been saving just a couple of dollars per pay period into my IRA at work and everyone said it wouldn’t amount to anything, but over time it grew and when I was ready to buy the triplex, I was able to liquidate that and use it as my down payment!  So, then, a couple of years later, we traded up and bought a six-unit building.

Lena:  So when you say you “traded up”, do you mean you did a 1031 exchange to buy the six-unit?

Mark:  That’s correct.

[Note:  For those who may not know, a 1031 Exchange is where the IRS allows you to defer paying taxes from the sale of a property if you use those proceeds to buy another property of greater value.]

Lena:  Ok, so you’ve done both single-family and multi-family, so which do you prefer?

Mark:  Multi-family.  And I would tell anyone starting today to go with multi-family.  The reason being is, first of all, if it’s a duplex, triplex or quadplex, you can get the same interest rate you would get buying a single-family house.  It’s not until you start getting into 6 or more units that it’s considered commercial property, then the rates change but anything 5 or under, you’re good.

Lena:  …And, you can live in one unit and have the mortgage paid for by the other rents.

Mark:  Right.  So, the key is that, say you want to buy a house that’s $200,000 with a 5% down payment (or less if you get an FHA loan) but let’s say it’s a $10,000 down payment, well you can find a duplex or triplex for $200,000 and use that same down payment.  You move into one unit and let the rent(s) from the other unit(s) pay the mortgage.  Now, instead of a mortgage taking a big chunk out of your wallet, you’re living rent-free or close to it.

Lena:  That is smart.

Mark:  And… watch this.  If there are tenants already in the building when you buy it, you get those deposits which you can now apply toward the down payment.  So, you’re not even paying the whole $10,000!

Lena:  Wow, I never thought about that.  I definitely had planned on getting into multi-family but now I’m even more sold on it!  Thank you for that.

Mark:  You’re welcome!

Lena:  Well, Mark, I’m going to end it here and pick up where we left off next week.  You’ve given us some great food for thought and I look forward to our continued interview.

Mark:  So do I and thanks for having me.

Manifestation Corner

 
When I first started the whole motivational, spiritual, “retooling my mind” journey over 20 years ago, someone gave me a book called, “The Miracle of Mind Power” and it literally blew my mind!

It was the first time anyone had ever explained to me “how” I actually had the power to change my life through my own thinking.  Sure, I’d heard the quotes “Thoughts are things” and “As a Man (Woman) Thinketh” and all that but it was the first time that someone laid it out and made it crystal clear for me that I didn’t have to look any further than my own mind to really achieve the things I wanted to in life!

Here I had been looking outside myself for the answers and it was within me all along!  So, after reading that book, I committed to a daily diet of positive, motivational reading, affirmations and visualizations that eventually led me to meditating and understanding the deeper, spiritual stuff.  But, I’m here to tell you that it works!

Your thoughts are energy, just like everything else in the Universe, and energy attracts other energy of its kind, so, if your thoughts are constantly on positive things and the good things you’d like to accomplish, then you will begin to attract those things into your life; however, if you’re constantly focusing on all the negative stuff and always worried about things not going right, you will attract more of that.

I don’t have room here to really delve into this the way I’d like, but I encourage you to begin seeking out this knowledge on your own.  When you begin to practice it consistently, you will be surprised at the difference it makes in your life and in building your real estate business.  Remember, “In all thy getting, get understanding.”.  Namaste.

Suggested Materials

Here’s a great article that outlines the advantages of single-family and multi-family investing

Click Here for more info on the pros and cons of investing in both single-family and multi-family properties

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