Buying a multi-unit home might seem like a daunting idea. Not only do you own one unit; you own several of them. This often means a larger mortgage payment and more area to maintain. While these thoughts are scary, there are other things it is as well – more cash flow, an investment for the future, and easy appreciation.
If you’ve thought about investing in real estate, consider a multi-unit property is one of the easiest ways to go. Not only will you get help with your mortgage payment, if you live in one of the units, but you have access to many loan programs including FHA loans.
Cash Flow Helps You Grow
If you start out with a multi-unit home as part of your primary residence, you have the fortune of buying a home that you can live in and rent out. You collect rent which you then put towards your mortgage. This lowers the money you have to pay out of your own pocket. As your cash flow increases and you are able to buy your own home, you can further your rent by renting out the unit you occupied.
As time goes on, you can increase the rents you charge, keeping them comparable to others in the area. Luckily, though, your mortgage payment will never change. Higher rents means you can pay more of your mortgage off each month. Eventually, you’ll own the home faster than you would if you lived there. You then own a rental unit free and clear and have even more cash flow coming into your life.
Real estate investors, especially the novices, are more likely to invest in single-family homes. Not everyone is looking for a single family home, though. Whether due to cost or just the space to maintain, multi-unit properties often rent faster. With less competition on the horizon, you stand to make more money in the end.
Tax Breaks Help Make it Affordable
When you own a multi-unit home and rent it out, you often get tax breaks you wouldn’t get if you owned a single unit for yourself. Essentially, owning a multi-unit property means you own a business. You rent out to others, so you get the deductions that many businesses get. The largest deduction is often depreciation, but your tax advisor can help you determine which deductions apply to you.
Government-Backed Loans are a Possibility
When you buy a single-family home for investment purposes, you generally have two options – conventional and subprime loans. When you buy a multiple unit property, though, you have more options. VA and FHA loans are both a possibility as long as you live in one of the units.
This means you can buy an investment property with little money down. If you qualify for a VA loan (meaning you are a veteran), you won’t need any money down. Even though the programs are essentially for owner-occupied properties, there is a loophole as long as you live in one of the units. You can rent the remaining units and collect the rent. While you can’t use the rent for qualifying purposes, you can use it to help you pay your mortgage every month.
All Properties in One Place
Perhaps one of the largest benefits is the convenience of the multi-unit home. It gives you the opportunity to rent out more than one home, but keeps them all under one roof. You don’t have to run all around town trying to fix things or find renters in various areas. Everything happens in one place. It cuts down on the craziness and lets you keep things more organized as a landlord.
Investing in a multi-unit home can help you make money without the headache of investing in several single-family homes. If you play your cards right, you can even use government-backed financing, helping you get a home with a small down payment. You’ll also be able to take advantage of the relaxed guidelines. As always, discuss your options with your tax advisor so you can determine what is right for you and your family.