Should I buy a multi-family property?

Sammamish Mortgage
Post Date: February 11, 2021Updated: April 30, 2021

Are you looking for a home, but also trying to find a way to invest in your future? A multi-family home might be a good option. Buying a multi-family home means you can live in one unit and rent out the rest. But is being a landlord what you really want?

How to Hack Your House Payment

There’s a popular trend in home ownership these days, and it’s called house hacking. You buy a multi-family property, like a duplex, triplex, or fourplex, live in one unit, and rent out the other(s.)

This can be a great way to turn your new home purchase into a way to defray your own mortgage payment. You’ll have to find a suitable property with two to four units. Anything with five or more units is considered commercial property, and won’t qualify for your purposes.

Financial Advantages

The most apparent benefit of buying a multi-family property is that you can drop your housing payment significantly. For example:

If you purchase a duplex with two, two-bedroom units, live in one, and rent the other out. If your mortgage is $1800 a month, and you are able to charge $1000 in rent, your monthly obligation drops to $800 if you put the rent towards your mortgage.

If you bought a fourplex, your payment is $2500, and you can only charge $750 per rental, you still drop your mortgage payment down to $250 per month. If you pay your mortgage from other income, and also put your incoming rents towards the principal, you can pay off your home much more quickly.

It’s typically cheaper to finance a primary residence than a property solely used for investment. By buying an investment property you can live in and which counts as residential,you can get primary residence financing which has a lower interest rate and lower fees and can also qualify you for a lower down payment.

Drawbacks of House Hacking

Real estate investment shouldn’t be taken lightly. Being a landlord comes with its own sets of risks and headaches. If your units sit vacant, you’ll still have to pay your full mortgage, so consider carefully what you can afford and don’t overextend assuming you’ll have rents coming in year-round.

You’ll have to find tenants, deal with them and their various demands, manage rent collections and maintenance, prepare for potential evictions, and absorb costs of upkeep all the units, not just the one you’re living in. Plus, you’ll give up a certain amount of privacy living next door to your rental units.

Still interested in a multi-family home? Talk to a Loan Officer today about how to structure a home loan for this kind of property purchase.

Today’s Mortgage Rates Jun, 15, Tue, 2021

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