Real Estate Experts and Investment professional agree that buying a multi-family property in today’s market can be a great investment.
But there are a few things to consider to help you decide if it’s the right option for you.
1) Financing A Multi-Family Home Is Different Than a Single-Family
This initial cost of multi-family may seem out of reach for many younger buyers, and that is why they often opt for condos or single-family homes. However, you can consider the income generated from the additional units as part of your income and qualify for a larger mortgage.
Let’s say you buy a duplex and plan to live in one unit and while renting out the second. Suppose you can get $1,500 per month for your second unit, that’s an additional $14,000 that can be factored into your financing ratios. Working with experienced lenders such as NAME, Firm can make all the difference when it comes to figuring out the right mortgage options for you.
2) Buying A Multi-Family Home May Limit Your Location Options
If you are looking to buy an owner-occupied (meaning, you live in it) duplex, three family or apartment building you may find that some of the towns or neighborhoods you want to live in may not be available to you. Zoning laws and regulations in many of the towns in Essex County favor single-family dwellings, with the exception of small areas, usually near “downtown” or main roads. Cities, on the other hand, may encourage owner-occupied residences in many neighborhoods. Salem, MA, for example, is proposing a tax credit for owner-occupied units as a way to keep roots in the neighborhoods that might otherwise be full or transient students.
As we’ve mentioned in a previous blog about first-time home-buyer(link), most banks only require you to live in a unit for 9-12 months. As long as you’re not extremely picky about the type neighborhood you live in short-term, a multi-family can be a great option for you in the long-term.
3) Make Your First House Multi-family
We’ve covered this a number of times in other blogs (links), but the advantages available to first-time homebuyers is so significant, we’d be remiss if we didn’t bring it up again. Qualified first-time home buyers can get loans with just 5% down (and less in some cases.) If you buy your multi-family as a second home, the bank will consider it an investment property and will require significantly more down payment and potentially higher rates. Again, working with experienced professionals like our friend Kevin Potter at Cross Country Mortgage in Danvers can make all the difference.5)
4) Make Sure Your Income-Generating Unit Is Legal and Permitted
One thing that can throw a monkey-wrench into your financing is if the buildings second/third/fourth unit has not been permitted. Just because a current owner is renting it out doesn’t mean you’ll be able to.
Things like ‘in-law’ units, converted attics and basements may be a great fit for the current owner and tenant, but don’t necessarily meet local code or ordinances and therefore can’t be factored into your financing as income generating units.
If you have any questions about a property you’re considering, be sure to do your due diligence with your local building inspector and zoning board.
Want to learn more?
We’ll be holding a free seminar for first-time multi-family property owners. Space is limited, so please register below or call our office at 617 212 3251.
Register below for our free seminar.
DATE: Wednesday, September 20, 2017
TIME: 7:00 PM
LOCATION: 40R Merrimac St. Suite 102E, Newburyport, MA 01950
DISCLAIMER: The data and information on our website are merely our opinions and should not be construed as advice or counsel on financial or legal matters.