November 6, 2024

Investing in real estate, if done thoughtfully and intelligently, can help you build wealth.
Insider has spoken to a handful of investors who have used real estate to achieve financial independence, including some who got started with less than $10,000.
If you’re interested in buying property, specifically as a means towards financial freedom, consider starting with a multi-family home. 
These are single buildings that are divided to house more than one family living separately, and range from duplexes to triplexes to fourplexes. (Buildings with four or more units are typically considered commercial real estate properties.)
“‘Twos’ and ‘threes’ and ‘fours’ are a fantastic entry-level investing approach,” said real estate investor and consultant Dana Bull, who acquired seven multi-families in Massachusetts over five years.
Because duplexes, triplexes, and fourplexes fall under the bracket of residential real estate, you’re able to utilize residential loans, she pointed out. That means you can take advantage of low down-payment programs if you intend to occupy the property.
If you’re looking to buy commercial, “you’re likely going to be funneled into commercial financing, which is going to require a higher down payment and will usually come with a higher interest rate,” she explained. That’s not ideal for a first-time investor.
There are a couple of other financial benefits, Bull said.
There’s what she calls “the acquisition discount.” If you buy a multi-family, you’ll likely pay less than if you were to go out and buy two to four separate condos or apartments, she explained. “Say you’re buying a three-family building that is $900,000. If you were to buy each of those as condos, maybe you’d be paying a total of over $1 million.
“If you buy them all together, you get that discount.”
You also get economy of scale when you own a multi-family. Think about the maintenance required for a multi-family home versus a single-family home, she said: “If you buy a three-family, when the roof goes out, you only have one roof to replace. You have one driveway to shovel. You have the shared hallways to take care of.”
Homeowner maintenance adds up, and it can be a lot simpler and cheaper to own a multi-family investment property rather than a couple of single-family homes.
Another New England-based investor advises real estate new-comers to start with multi-family properties. Matt, who prefers to go by “The Lumberjack Landlord” and owns over 100 units in New Hampshire, specifically recommends trying a “4, 3, 2, 1” strategy.
The idea is to start off by purchasing a “fourplex,” a low-density four-unit residential building, and live in one unit while renting out the other three. In doing this, an investor is able to subsidize the renovation of the property, as well as their own living expenses. This investing concept is known as “house hacking,” which many young investors, including Matt, have used to get their start in real estate.
“You can see if you actually like being a real estate investor,” he said about the method, which provides a new investor with immediate cash flow. If you enjoy the process of buying, renting, and managing tenants, and want to expand your portfolio from there, you then repeat the process, but at different levels of expense and effort. 
For instance, should one decide to continue following the “4, 3, 2, 1” method, the next step after leasing the units in the fourplex would be to purchase a “triplex” (a three-unit building), live in one apartment and then rent the others out. The process continues down the line, with the next step being to purchase and reside in a duplex property while renting out the other half.
By this point, you’ll own a handful of units and your rental income may cover the majority (or all) of your housing costs, which will free up more cash to continue saving and investing in real estate. The final step of Matt’s strategy is to buy a single-family home. “You’re moving up the ladder while having people largely pay your mortgage,” he said.
Note that not all markets have an abundance of multi-family properties. 
His and Bull’s market, both of which are in New England, happens to have a large inventory of these properties. Many of the cities in the region were built in the late 1800s and early 1900s when that style was popular and no zoning restrictions prevented the construction of them. 
If there aren’t multi-families in your area, look for a property with an unfinished basement that you can turn into another unit and rent out, or even a home with multiple rooms that you could rent out, said Matt: “Why not have roommates pay you rent? Why not have their rent help pay your mortgage?”
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