Multi-Family Property

As home prices continue to rise, many buyers consider purchasing a multi-family property to live in and earn rental income. (Photo: Shutterstock)

Suzanne Plewes, RE/MAX Alliance in Loveland

Suzanne Plewes, RE/MAX Alliance in Loveland

LOVELAND –As home prices continue to rise, many buyers consider purchasing a multi-family property to live in and earn rental income. Naturally, multi-family properties are a bit different from single family homes. Here are some pros and cons of buying a multi-family property as a primary residence.

Multifamily mortgage terms
Mortgage interest rates and down payment requirements are similar for both single family and owner occupied two to three family properties. This is a nice benefit if you plan to live in the home for a limited time but keep the property as a long-term investment. The interest rate you receive would be less than if you purchased it strictly as an investment property.

Rental income
One of the best benefits of buying a multi-family property as a primary residence is the rental income. This income can help cover the mortgage payment, making your remaining expenses much less. Also, you can normally purchase a more expensive multi-family than a single family since most lenders will consider rental income in your qualification. On the downside, vacancies can have a major impact on your cash flow if you rely heavily on the rental income to pay the mortgage.

Maintenance and other expenses
Living in a multi-family property as a primary residence makes property management easier and less expensive. Since you are on-site, you can identify necessary repairs quickly, before they become major problems. Additionally, tenants will care for their units better knowing that you are keeping a watchful eye. The one downside is that multi-family homes do cost more to maintain because there are two heating systems, two hot water tanks, two kitchens, etc. Be sure to budget properly for the added expenses.

Privacy
The biggest downside to multi-family living is that you have less privacy than you would a single family home. This simply comes with the territory. Although you have control over the boundaries and rules, building a good relationship and maintaining open communication with your tenants will make it a better experience for everyone.

Selecting the right multi-family property
How you evaluate multi-family properties should be different than single-family properties, given the added investment factor. If you are a first-time buyer, it is particularly important to work with an experienced real estate agent.

By Suzanne Plewes, RE/MAX Alliance in Loveland. Suzanne is a broker associate at RE/MAX Alliance. Write to 750 W. Eisenhower Blvd., Loveland, CO 80537, call 970.290.0373 or e-mail suzanneplewes@remax.net.