Multi-family homes can be a great way for novice real estate investors to get started buying properties that will generate passive income. However, these properties have some challenges that single-family homes don’t have.If you’re considering buying a multi-family home, here’s what you need to know before jumping in.
A multi-family home is a single building that’s set up to accommodate more than one family living separately. That can range from a duplex, which has two dwellings within a single building, to homes or small apartment buildings with up to four units. (Buildings with more than four units are considered commercial properties.)
The owner of a multi-family home can either live in one of the units and rent out the others, or live on another property and rent them all out. If you don’t live in the property, you’re considered an investor, and the rules for getting a mortgage are different.
While you can rent out some or all of a single-family home, multi-family homes have some characteristics that you won’t find in a traditional house. Each unit in a multi-family home has a different address, their own kitchens and bathrooms, and, typically, their own entrances.
“When you’re looking at a single-family home, you’re thinking about your own needs only,” says Charlotte Winckowski, a sales associate with ReMax Central Group in Toledo, Ohio. “When you’re looking at a multi-family home, you have to think of it more as a business. What will the needs of your tenants be? What kinds of income will it produce, and what will your expenses be?”
Some multi-family homes started out as large single-family homes that an owner or developer decided to divide into more than one property. Those living in multi-family homes may have less privacy than those living in single-family homes because of shared walls.
You may be able to use the projected rental income from the property to help you qualify for a mortgage, and you may also qualify for a higher loan amount if you’re purchasing a multi-family home.
In most cases, a multi-family home will also serve as an investment property for the owner. Real estate remains American’s top choice for long-term investments.
In order to maximize your investment, it’s important to understand the costs associated with the property, including not only your mortgage, property taxes and homeowners insurance, but also other expenses such as utilities, realtor, advertising (to attract tenants) and legal fees.
“An evaluation of the property should include an inspection by a licensed inspector and market research to include a market lease-rate analysis along with current market rental conditions,” Wyman says.
Multi-family homes are best for those who are interested in getting into real estate investing and are comfortable with the added responsibility and time commitment that comes with being a landlord. They can also be a smart choice for multi-generational families interested in buying a property together while having their own dedicated space.
This blog was provided by our friends at Bankrate…see the full article at “https://www.bankrate.com/real-estate/what-is-a-multi-family-home/”