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Investor loans are treated differently than owner-occupant loans. If you don’t plan on living in a property, 20-25% is usually the minimum down payment you can expect, and interest rates are slightly higher.
However, owner occupant financing can be used on properties with up to four units. So buying a multi-family duplex or fourplex is an opportunity to purchase a home and an investment at the same time.
Advantages of Buying a Multi-Family
- Earn rent immediately that offsets a significant portion of your mortgage payment
- Cash flows better than most single-family rentals
- Rare opportunity to use favorable owner-occupant financing for an investment property
Disadvantages of Buying a Multi-Family
- Limited neighborhoods to choose from
- May not be adequate space or area for your personal and family needs
Differences in the Process
A multi-family purchase is very similar to a single-family purchase. In fact, both transactions use the same contract.
The biggest difference is dealing with leases and selecting a property manager. When you buy a property, you purchase the leases attached to the property. For this reason, it is critical that you receive, review, and approve the leases during the option period of the contract. You are obligated to the leases, so be sure to verify the rents, security deposits, terms, and when the lease expires.
You should also select a property manager. Even if you are living in the same building, it is a good idea to not try to take on management yourself. The savings will not likely be worth the time, often highly inconvenient, that you spend monthly managing your tenant or tenants.
Fourplex vs. Duplex
Fort Hood has a large selection of fourplexes and duplexes, and is an excellent opportunity for anyone interested in purchasing a multi-family.
- Better cash flow
- New construction options available
- Larger neighborhood selection
- Larger units, often with a garage
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