Special offer

Investing in Multi-Family Homes

By
Real Estate Agent with New Home Star

For many first time home buyers or younger real estate buyers purchasing a multi-family home can be a very smart move.

There are a lot of benefits to buying a multi-family home that can help you start your path to becoming a real estate investor or even just make your own ability to make house payments much easier.

First off let’s explain what a multi-family home is. A multi-family home is a home that is divided to house two different “families” or groups of people.

Generally they are referred to as row-type housing, flats, duplexes or apartment buildings in most cases but may be known by other names too. The homes are very much independent of each other in terms of “living quarters” but often share the yard and/or the driveway and garage if one is available. How the shared areas are handled is generally left up to the “landlord” or owner of the multi-family home.

                                            Post image for Investing In Multi-Family Homes

Row Houses – The set up of a row-type house can be one entrance way that splits in a hallway to the left and right. The houses can have both and upstairs and downstairs or be on one floor. They can also have two entirely different entrances with separate front porches and stairs with their own entrance ways/door into the home.

Flats – These are generally two homes that are created with each house being on one floor, with one house being the “upstairs” home and the other house being the “downstairs” home. Entranceways can vary from one main door that then splits to the staircase leading to the upstairs home and a door to the downstairs home on the opposite side with a shared downstairs hallway entrance; to two entirely separate entranceways with one door going directly into the downstairs house and the other door going to a set of stairs that lead you to the upstairs house (usually with another door at the top of the stairs).

Duplexes – This tends to be a catch all phrase for any type of living where there two living spaces and can vary tremendously in layout from one house in the front and one house in the back; two homes side by side; one home upstairs and one downstairs, or a number of other setups. Generally they still refer to housing only two homes although some people do call homes with multiple homes duplexes but the term itself does mean two homes.

Apartments – These dwellings are rather self-explanatory to most and refer to homes that generally house at least three homes. These homes can be set up in a multitude of ways and can include housing areas of various sizes in one house. Apartments are generally purchased with the intent to rent out each of the units and not something that first time home buyers are usually interested in because it takes some knowledge and know-how to maintain and handle a multitude of tenants.

The Reason For Buying a Multi-Family Home

As mentioned in the beginning, multi-family homes are often purchased by first-time buyers or young couples just starting out. This is quite often a very good move for a couple of reasons, the biggest being that buying a multi-family home gives you a place to live while not having to come up with your mortgage payment because you have a renter paying you.

You choose the house you prefer and move into that home. Many times a multi-family home is already “rented” out and you can choose to keep the renter(s) or not keep them when the house is purchased. If you choose to keep the renters a new lease is signed or the current lease is honored by the new buyer.

Once you have a home you now have another home to bring income in to help you pay your mortgage. In many cases that income can completely pay your mortgage and sometimes leave you with extra funds to put away towards repairs that may be needed or the purchase of a single-family home in the future. You rent out the other home and live with one other renter which you can choose yourself or, as mentioned, keep if the house is currently rented.

That is probably one of the biggest benefits to buying a multi-family home; you basically have little to no mortgage money that you have to come up with because your tenant is paying the mortgage for you. This frees up a lot of money for you to work with that you would normally be using to make monthly payments on a home of your own. So you are basically living “rent free” or “mortgage free” with your tenant paying you for their home.

The downside to this idea of the tenant paying your mortgage is that if your tenant isn’t very good at making their payments on time or completely quits making these rent payments you still have to come up with your mortgage payment. This can be very hard, especially if you are suddenly met with having to come up with a mortgage payment each month.

This can also happen if your tenant decides not to renew their lease and leaves the other home empty. While it’s rare to have a rental unit empty if it is well kept and in a decent neighborhood there are times when rental units can sit for months without any real lookers, making it financially tight for you.

This is why it’s best to buy a home that you love and where you would live because chances are others will want to live there also and the home is appealing and in good shape. Obviously you’re not going to move your own family or yourself into a bad neighborhood or purchase a multi-family home that’s falling apart so if you go by these simple rules for your first multi-family home you can generally feel safe that you won’t often run into having an empty rental unit available for any length of time.

It’s Not All Roses

While we’ve pointed out the one very good reason for buying a multi-family home there are also many downfalls of purchasing them too. We will cover those in another article but suffice it to say that if you go into buying your first home with some knowledge and thought you could end up with a very good start to becoming a multi-property owner with investments that will pay off well. As the saying goes, you can rarely go wrong with investing in properties and that’s usually true. As will all investments though there are risks.

For more information on how to buy or sell  a home, go to http://www.springscleverseller.com or contact Juanita Simkins, Professional Realtor & Expert Negotiator (719) 229-5770

Posted by

For more information on how to buy or sell  a home, go to http://www.move2coloradosprings.com or contact Juanita Simkins, Professional Realtor & Expert Negotiator (719) 229-5770

Comments (0)