![]() You’ll need a hefty insurance policy and make sure you keep up with maintenance and tenant requests.įHA self-sufficiency test: 3- and 4-unit properties must pass the self-sufficiency test which tells FHA that the property can support itself if HUD has to foreclose. Someone getting hurt on your property due to negligence or lax upkeep can mean a big lawsuit. Legal risk: Renting to others always involves risk. From local laws to marketing to repairs to managing tenants, it could be an overwhelming first year. But there’s a lot more to learn when you’re a landlord. Don’t plan on selling the property for a profit in a few years.īigger learning curve: Owning a home for the first time is hard enough. But someday, the pendulum will swing and fewer people will be interested in buying a duplex, triplex, or fourplex. Harder to sell: Right now, house hacking is en vogue. Most single-family residence purchases don’t require any reserves after closing. Then, with closing costs and prepaid items, you’re looking at a substantial upfront cash requirement for a multifamily home.Ĭash reserves: You need 3 months of full payments in reserve after closing for a 3- or 4-unit property. ![]() Higher initial cost: A larger purchase price means more down payment dollars. If your renter doesn’t pay, you still have to. Higher payment: Even though you’ll be collecting rent, your mortgage payment will be higher. See if you can buy a 2-4 unit home with FHA. But even before that, it could give you an additional income source to fall back on if you lose your primary income. In fact, it could be enough to support your retirement someday. Move-up ability: After 12 months, you can legally move out of the property and convert the whole thing into an investment property.įuture cash flow and income stream: A 2-4 unit property will generate significant cash flow if you hold onto it long enough. With FHA multifamily, you get started on your real estate endeavors now. Get started earlier: It could take you 10 years or more to acquire the financial strength to buy an investment property if you buy a single-family home first. Conventional loans allow 5% down on a 2-4 unit as of November 2023. Low down payment: With FHA, you can own a duplex, triplex, or fourplex with just 3.5% down. You learn “property management” as well as “people management.” You can use these skills in all sorts of roles in the future, well beyond owning investment properties. Get landlord experience: Managing a property is a valuable skill. This also comes in handy in case of a job loss or financial emergency. ![]() Get help with the mortgage: Your tenants’ rent payments help you pay your mortgage. This means you might qualify for a higher purchase price than buying a single-family home. Use future rental income to qualify: FHA allows you to use future rents to qualify even if you have no landlord experience. Here are pros and cons of buying a 2-, 3-, or 4-unit home. However, it’s not as glamorous as Instagram would have you think. House hacking with FHA can be a great idea. Single family home vs multi family home pros and cons Payments, interest rates, and other details are for example purposes only and do not constitute a quote or commitment to lend. *Calculates based on employment income plus 75% of projected rents. ![]()
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