Choose your first rental properties - duplex, triplex, four plex, single-family house, condo, or co-op?

From Buyincomeproperties.com

Rental Property
Choose your first rental properties - duplex, triplex, four plex, single-family house, condo, or co-op?
By Roger
Sep 8, 2005, 18:32

Selecting your first properties is very important step. If you choose poorly in the beginning, your real estate experience may be bitter.

Learning what to look for and when to buy a property are essential to your success. No cookie cutter approach works for all investors. However, most first-time investors do best when they start with small apartment buildings. Duplexes can be good investments for investors who will live in one of the units, but they generally don't produce enough income to pay for themselves when they are not owner occupied. Buildings with four rental units typically are ideal first investment. The cost of these buildings is usually manageable, and the financing often is quite attractive because the buildings can be purchased with as little as a 5% down payment when the purchaser will live in one of the units.

A four-unit building offers many advantage over duplex. If you don't plan to live in the apartment building, you have four rental units to pay for the property. If one unit goes vacant for a while, you still have three units to help pay the mortgage. It's possible to buy buildings where three units cover your costs and fourth unit represent profit. Creative financing usually is not very effective with four-unit buildings because the loans generally are sold on the secondary market and must meet strict criteria.

Triplex are buildings with three rental units. Normally, they are better than duplex, but not as good as four-unit buildings. When you make your choices, don't be blinded by the sales price. A cheap buildings is not always good bargain. You have to run the numbers on any property to see whether it is viable purchase.

A lot of investors consider buying a single-family house, condo, or co-op as an investment property. This can be okay if you will live in the home, but a single dwelling generally is a poor investment for purely financial purposes. The cost of most homes is too high to expect the rental income to cover the cost of mortgage.