Buying a Home: Is a Multifamily Property a Smart First Investment?
There are a huge number of first timers looking at buying a home today and many interested in cashing in on the current market to invest in real estate while home prices are still cheap and mortgage rates still so low. So is a multifamily duplex or triplex a smart move? These types of properties are frequently pitched as the perfect starter real estate investment, and they do come with a number of advantages. With interest rates so low those looking into buying a home might find that they can by a multi-unit property with a principal and interest payment around or less than what they are paying in rent. On a three unit property that means you get to live for free and have rent coming in from two other tenants. So you could be getting paid every month while living for free. If you ever decide to have kids or need to take care of your parent or have the in-laws moving in, you can always work a tenant out and use the extra space as your needs grow. With some low down payment mortgage options like FHA loans still out there this can be a great way for some to leverage more real estate and begin building up a nest egg. Even if you can just lower your rent it seems like buying a home like this is a no-brainer. Plus, if you ever need to relocate out of the area you can rent all of the units and enjoy extra income every month. However, many first time home buyers and investors do get carried away and overlook the details. You must watch out for all the expenses of owning a home and responsibilities of managing a rental property. What if renters don’t pay or you have to replace them, do you still have it covered? How much additional money might you have to invest in cash to improve or upgrade the other units for tenants? It might be the best deal of your lifetime, just make sure you know all the numbers before leaping.
Thinking about buying a home? Is a multi-unit property just what you need or a disaster waiting to happen?