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Should You Choose a Multifamily Home as Your First Real Estate Investment?

You are tired of renting or living under your parent’s wing. You managed to save enough money for a home down payment and are ready to take on the role of a homeowner. Since this is your first real estate purchase, you want to make sure you get the most out of your investment.

You did your research and already have your non-negotiables in mind. Your lender already pre-approved your mortgage and you know how much of a property you can afford. You even have a number of possible recommendations of movers in the local area so you can move in asap after finding the perfect home.

When talking to your real estate agent, they will ask you a few questions to help you find the right property. But one question you might not be ready for is whether you would consider buying a multifamily home or stick to a single-family home.

Most homeowners would choose the latter. Their main reason is that they want to experience more freedom and privacy minus the responsibility expected of a landlord. But there are many incredible reasons a multifamily home can be the best choice you can make for your first real estate investment.

Maximize the Opportunity to Build Wealth

The pandemic made us realize how important it is to own your own home. The prices of homes surged due to the high demand for houses for sale and the lower count of listings. But when you buy a single-family home, it will take years before you can fully enjoy your wealth.

Having a house enables you to tap on your equity in the future. You can use this to make home improvements or receive a lump sum of cash for any other reasons. You also have the option to sell the house and have no obligation to pay for the loan.

With a family home purchase, you are essentially kick-starting your wealth building. Your first real estate investment can already make money. This can last you for a long time for as long as you are willing to handle tenants.

With a single-family home, you can only use your home to earn money by renting out a spare room. But with a multifamily home, you can rent out the other unit and raise your rental fees so you can earn more money.

Benefit From Primary Residence Financing

Acquiring a loan for a multifamily home is usually easier and cheaper if you plan on turning the property into your residential property. This means if you are going to live in one of the units, you can enjoy better rates and an easier application. Here’s why.

Lenders believe people buying multifamily homes as a primary residence are more likely to repay them. This is why interest rates are usually lower.

Programs like Federal Housing Administration (FHA) Loans can help you buy a multifamily home as a first-time homebuyer. This leads to lower down payment requirements.

A multifamily property needs to meet certain requirements to be considered a primary residence. The house needs to be within a reasonable distance of your work location. You are also expected to live within the property for the better part of the year and move in within 60 days after the closing date.

Split the bill with others or let them pay your bills

bills

We mentioned earlier that multifamily homes allow you to start your real estate earning potential by renting out your other units. Another perk is that you can use your tenant’s payment to pay your bills. In some cases, you can charge an amount high enough to cover your monthly mortgage.

When it comes to single-family homes, you have no choice but to shoulder all the expenses including your monthly mortgage. Let’s say you pay $1,250 for your house each month. You are the only one who will find ways to ensure you pay your bills on time.

If you invest in a family home, you can reduce your bill thanks to your tenant’s monthly rent. Instead of shouldering all expenses, you get to reduce your costs and use the money to make other investments. You will need to consider the expenses associated with having more than one unit under your name.

Of course, multifamily homes have their fair share of drawbacks. But if you think you can handle becoming a landlord and wants to start earning immediately from your real estate investment, then such a property type can be a great investment. This can help you quickly build your portfolio so you can diversify it in the future. Once you decide that you want a single-family home for your family, you can use your earnings in paying for your next home.

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