As prices come down across the board many seasoned real estate investors are migrating to larger properties where they can achieve greater economies of scale. This is leaving fewer professional investors in the market for duplex, triplex, and fourplex properties. As the investor community moves away from 2-4 unit properties it leaves the bidding wide open for owner-occupants and first-time buyers who want to buy a home that doubles as a savvy investment.
The best thing about buying a 2-4 unit property as your primary residence is that you can get FHA financing for up to 96.5% of the purchase price with interest rates currently as low as 5.0%. Since FHA loans also allow you to take up to 6% seller's assist towards closing costs you can often buy these properties for just a few thousand dollars out of pocket. The key is that you need a good credit score and solid, verifiable income to qualify for the FHA loan and you must live in one of the units yourself.
Not only are professional investors moving away from these smaller multi-unit properties (decreasing demand), but many owners of 2-4 unit buildings have recently lost much of their wealth in the stock or real estate markets and feel great pressure to sell quickly to generate cash (increasing supply). For both these reasons the prices are quickly coming down to meet the first-time buyer market. In Philadelphia there are opportunities to buy duplex or triplex properties that will generate enough rent from the extra unit(s) to cover most or all of the monthly mortgage payment. Combined with low-down-payment FHA financing this means a buyer can potentially own and live in a multi-unit property for just a few thousand dollars down and little or no out-of-pocket monthly expenses. For a first time buyer this is a great way to build equity quickly - especially if you consistently save or invest the money you would otherwise be paying for your personal rent/mortgage.
Owning and living in a multi-unit property is also a great way to gain experience in property management. You'll quickly learn how to screen and deal with tenants, scrutinize leases, and handle the routine maintenance issues associated with investment property ownership. Buying and occupying a multi-unit property can not only pay financial dividends, but the property management experience you gain will be invaluable should you ever pursue more advanced forms of real estate investing.
If you'd like to explore the 2-4 unit FHA option please give me a call or email today.
Comments(0)