First time buyers often look to condos as a first purchase because they’re more affordable than single family homes. However, when you add in condo fees, potential assessments, and other factors, it may not be so ideal. Multi-family homes are a great alternative to both single families and condos,… and are great for first-time buyers. Here are several reasons to buy a multi-family as your first home.
1 – Great Condo Alternative
The living environment of a condo and multi-family are similar. You have your own space and have some shared common area with other residents. The big difference is, owning a multi-family means you have control over those common areas and over your immediate neighbors. You screen your own tenants, make the rules, and can create a more comfortable living environment all-around.
2 – Rental Income
The rental income from other units in your multi-family will offset your housing expenses. In fact, if you have 3-4 units, you may even live rent-free! This is one of the top reasons to buy a multi-family as your first home. Reduce your own housing expenses and build equity over time. It’s the perfect arrangement for a first-time buyer.
3 – Interest Rates for Primary Residences
Interest rates and down payments for investment properties are often higher. Most investment loans require 25% down and rates can be 1%-2% more (than mortgages for primary residences) depending on your other qualifications. However, if you’re purchasing a 1 to 4 unit multi-family to live in yourself, then your loan would be that of a primary residence. The down payment and interest rates are similar to purchasing a condo or single family home. By obtaining a fixed rate loan, you can lock in low rates over the life of the loan even if you move out and convert it to full investment use.
4 – Future Equity Potential
In addition to building equity over time, multi-families have the added option of converting to condos. This can lead to a greater return on investment, although there are costs associated with this. First and foremost, you’ll need to draft and register documents to legally establish the condo project. Additionally, some repairs may be needed to make the units condo-ready. If you are purchasing multi-families with the goal of future condo conversion, be sure to let your real estate agent know about this during the search process. Some multi-families make better conversions than others, and your agent can help you evaluate options from that perspective.
Buy a Multi-Family As Your First Home with the Help of Our Experts
Purchasing your first home can be both exciting and confusing. If you intend to buy a multi-family as your first home, it’s important to work with an agent who specializes in multi-family properties. The investment aspect makes it much different than other property types. An experienced agent will help you evaluate cash flow, operating expenses, and return on investment. Contact us to be connected to an agent in our network.