So, you want to buy a home, and you think a buying a multi-family home is the way to go. Well, you could be right. A multi-family home offers an opportunity to get into a home and build equity sooner than you might be able to get into a single family home.
How do you know if buying a multi-family home is the right move for you? There's a lot to consider.
On the plus side, you'll have additional people contributing financially to pay your mortgage payment. It's nice to buy a house with somebody else's money! And on the long term, you can eventually rent out your personal apartment, create a positive monthly cash flow, and move into that single family that you couldn't afford when you first started looking.
Before you make that decision, however, you must do your homework. Consider:
Location: Multi-family homes are generally located in more densely populated areas, on smaller lots, and often in the older sections of town. Is this where you want to live? No problem? Okay, next consider:
The property: Most town's zoning confines multi-family homes to specific areas of the community, and many of these "multis" are older rather than newer. In some areas of the country, that means very old (over 100 years). So, as a prospective landlord, before buying a multi-family home, you'll want to assure yourself of the condition of the property, its mechanical systems, and costs of updates. You may also need to be concerned with lead paint risks and regulations, especially if your renter has children.
The tenants: If you're buying a multi-family home, you're going to be a landlord now, and that means you have to maintain not just your own home, but the units your tenants are living in as well. If you've interviewed your tenants carefully, done a credit check, verified references and filled out a proper lease, you may do quite well. It's also good to think about a clause in your lease requiring tenants to be responsible for repairs under $100.00 (or some other agreeable amount). If they know it's their responsibility to unclog the drain, they'll usually be a little more careful about what goes down it.
Now, don't forget. Tenants move in and they move out. And sometimes they don't take care of the property the way you would as the owner; because it isn't theirs. When the tenant moves out, you have another set of things to consider.
Is the property damaged now?
How much will it cost to restore it so I can rent it out again?
How long will it take me to get it ready for the next renter?
Do I have financial reserves on hand to cover the whole mortgage payment while the vacant unit is being prepared and re-rented?
Am I able to make repairs and re-paint the apartments myself to save on maintenance expenses? Or do I need to hire a professional?
In a word, the answer to "how to buy a multi-family home" is, "Carefully." But if you have carefully considered this, and you've decided it is the right move for you to make, then you have a few more steps to take to ensure you find a house that will not only make a great home, but also a great investment.
First step: Find a real estate agent or broker - one with plenty of experience. Make sure you get personal representation if the state you're in offers it. This means "hiring" your agent by signing an agreement with them. This agreement will outline the length of time you're committing to work with the agent, and will outline the agent's fee. But the benefits of this kind of agreement are far greater than its limitations IF you choose your agent carefully. The agreement places certain obligations upon your agent: reasonable skill and care, obedience to your lawful instructions, accounting, full disclosure, loyalty and confidentiality. Your agent must work at all times to act in your benefit.
Second step: Fully investigate the various types of financing available to you. A good real estate agent will be able to explain the difference between a bank, a credit union, a mortgage lender and a mortgage broker, and provide quality referrals if you need them. They will also be aware of first-time buyer programs, government loans, rehabilitation loans, and even town monies or other special programs that are available to help you purchase your multi-family home.
If you have carefully considered the information above, and begin the process at step one, then step two, you're off to a great start. Good luck on your journey to home ownership. By buying a multi-family home you'll have a great investment, too!
If you are in the Greater Hartford region of Connecticut, please call Lisa Orme at The Master's Key Realty LLC...we will help you in finding and buying a multi-family home!
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