Transcript:
Easan Arulanantham:
So, this next question is another housing question. “What were your thoughts on buying a multifamily property as the first home and renting out the other units?”
Tom Vaughan:
Yeah, I’ve thought about that a couple times. And we really think it’s a great idea, especially for somebody who’s going into buy a home for the first time, might struggle somewhat to pay the payment, go buy a say, a duplex, right? And if you look at the price of duplexes, they’re not that much more than single family homes. So you go in, you buy that, and now you got half of that residence is going to be rented. Now, you got to live next door to your renter. I mean, there’s all kinds of pros and cons there. But I think that’s a really interesting idea. And a good way of kind of getting into the market, generating an income. Rental income is awesome. It generally grows with inflation. And so you know, theoretically, you could get a renter that’s paying a big chunk of your mortgage. And so it allows you to have that capability. I would think even in the buying process, if there already is a renter, you might be able to get kind of credit for that as part of it. So maybe that would be easier to qualify for. I’m not a mortgage broker, so I’m not exactly sure how that works. But that makes sense to me. So I actually like that concept. I think long term personally, you know, maybe it’s better to be in a single family home. So you’re not living right next year renter, but you can get in the door that way, and then maybe rent to both out and keep that place as a rental and then move into your single family home, right? But I think it’s a good start step is to look at that type of situation a triplex or four plex or a duplex, for example. And there’s some there’s some nice areas that have duplexes here that you can, you know, you can get a nice, a nice location, which is important too.
Easan Arulanantham:
Yeah. And you also have to remember, are you willing to go through the hassle of dealing with renters? And what happens if it goes vacant for a prolonged period of time, because it’s the market’s cold. And so you have to also be wary of the loss of income too.
Tom Vaughan:
Yeah, exactly. I mean, it’s not a guaranteed income source. And generally speaking, it’s really nice to not have any turnover, because every time somebody leaves, you generally would have to fix it up at least somewhat, to get it ready for the next renter versus keeping somebody in. We always advocate to be under market, at any point in time. So if the average is $2000, you know, be at $1800 or $1750 or something, even though you’re collecting less than what you might be able to get at market rate. You’re not getting turnover because that person is paying $1750 They go look and they’d have to pay $2000, they’re gonna stay. Unless you want them to leave. That happens. But so yeah, I think that there’s, you know, some some risks there that have to be considered but you know, it At least in this area, rents have been really good for a really long time, and they’re not building a lot of new homes. So homes are getting so expensive. People can’t buy new homes, so they end up renting. We still have job growth here. You know, this is not a bad place to do that. That’s for sure, here in Silicon Valley.