As you picture your first home, chances are you don’t think of a multi-unit property. Don’t overlook this option, though. It offers many benefits that you may not find with a single-family property. If you have the money to purchase the property, why not do it? You stand to reap many benefits and may even make some extra income while you are at it. This type of property can really open up opportunities for you for the future.
Make a Profit with a Multi-Unit Property
When you purchase a multi-unit property, you don’t only purchase a home for yourself; you also purchase units for others. You are free to rent these units out, no matter what type of financing you secured. Most programs, including conforming and FHA programs simply require you to live in one of the units to consider the property owner-occupied. This leaves the remaining units open for rental. As you collect the rent, you can use it to help you pay your mortgage. This takes the burden off you. Who knows? You might even make a small profit out of it.
Save Money for Your Dream Home
Even if the multi-unit property was not your dream home, it could help you get closer to the dreams you pictured. Because the rental income can help you pay your mortgage, you are able to save money for your future dream home. As you build up your savings account, you can work your way closer to the down payment you wanted. Once you are able to secure financing on your single-family property, you can rent out the unit you lived in the multiple unit property, having all of your tenants pay your mortgage. This is how a multiple unit property can help you get closer to achieving your dreams.
Save on Your Taxes
If your tax liability is too much to handle, consider the benefits you receive as a homeowner. Because you are the owner of record, you get the benefit of claiming the real estate taxes and interest paid on all units in the property. This helps you to decrease your tax liability in the end. In addition, if you paid any points to obtain the mortgage or you pay Private Mortgage Insurance, you can write those costs off as well, furthering your tax deductions. This helps you to decrease the amount of taxes you owe, increase your income, and save even more money in the end.
Rental Income is Spread Out
When you rent out several units, rather than just one, you diversify your investment. For example, let’s say you have a one-unit property you rent out. The tenant signed a lease, but became unable to pay the rent after a few months. This leaves you with a mortgage obligation and no money coming in until you find a new tenant. This could put you in a financial bind as you try to juggle more than one mortgage on your own. On the other hand, if you rent out a multiple unit property, you lower your risk of being left stranded with an extra mortgage payment. If one tenant defaults on his rent and leaves the unit empty, you still have the tenants in the remaining units to pay your rent. It might not come to the full amount of your mortgage, but every little bit helps until you are able to rent the unit out again.
Have an Investment as a New Homeowner
It is not all that common for new homeowner’s to have money to invest. Between the cost of putting money down on the home, paying the closing costs, and the normal costs of owning a home, it gets costly. In addition, a first-time homebuyer can take a while to adjust to a new mortgage payment, which can take up to 28% of your monthly income. Oftentimes, this does not leave a lot of money for investments with the exception of a small emergency fund. When you invest in a multi-unit property as your first home, however, you get the best of both worlds. You get a place to live as well as a solid investment. Real estate investments are usually a solid decision, leaving you with a decent return on your investment. This is usually a much lower risk than standard investments in the market pose.
Buying a multi-unit property might not be the first thing you consider when you buy your first home, but you should entertain the thought. It gives you many benefits that a single-unit property would not provide. With the experience as a property owner right off the bat, you can then turn your expertise to other properties if you so wish. Even if you don’t want to continue your future as a real estate investor, making a profit off your first home right away can set the stage for a lucrative financial future.
If you want to purchase a multiple unit property, talk to several lenders to see what financing options are available to you. Some programs require you to put down more money up front in order to purchase the home or require you to have slightly better credit than was necessary for a one unit property. If you have the qualifications, however, it can be a great way to get your foot into investing. Shop around with different lenders and find the program that is right for you.
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