Do you want to learn more about multi-family investment properties in Southern California? Check out our post for some of the pros and cons!
Multi-family investment properties can help to grow your real estate portfolio. In fact, many people use owner-occupied multi-family properties to begin their investing careers. By living in one of the units of the building yourself, you will be able to purchase the property (up to 4 units) with an FHA loan and a low down payment. The rent you are charging the other tenants in the building should pay your mortgage as well as many other costs of ownership. In essence, you will be able to live for free while building equity and saving money. Win. Win. Win.
Below, we discuss the pros and cons of owning multi-family properties. Not just owner-occupied ones, but properties that are completely tenant occupied as well. Learn more about what’s involved than give us a call to find the best deals on multi-family properties in Southern California!
Lower Vacancy Rates
When you have your eggs in more than one basket, a vacancy won’t be as big of a deal. Look at it like this. You could have one single-family home in which you collect $2,000 per month in rent. If your tenant moves out, you are collecting nothing. Or you could have a duplex, with each unit renting out for $1,000 each month. If a tenant moves out, you will still be making $1,000, which is much better than $0.
Low Funding Costs
FHA loans are the low down payment alternative to a conventional mortgage. You can use an FHA loan to buy a house or you can use it to buy an investment property with up to four units. Using this strategy will require you to use one of the units as your primary residence, but only for 12 months. After that, you can rent out the entire building, quickly building equity and paying off your mortgage.
Lower Maintenance Costs
When making major repairs or renovations, it can be more cost-effective to repair things once as opposed to two or three times. Let’s say the roof needs to be replaced on your triplex. You do it once and you won’t have to worry about it again for quite a few years. On the other hand, if you have 3 houses, you will be looking at roof repairs much more often. This can not only cost more but take up a good amount of your time too when you consider all of the repairs a property often needs.
When you have a multi-family property, you will be dealing with more than just one tenant. You will get repair calls more often and will possibly have to mediate disagreements between neighbors.
People don’t always see a multi-family property as somewhere they plan on being for a long time. It is typically more transitional, which mean more turnover for you. You will have to screen more tenants, professionally clean more often, and can potentially lose out on more rental income than you would with a stable tenant in a single-family property.
If you opt to use an FHA loan to purchase an owner-occupied investment property you will have to live on site for a year. This gives your tenants the ability to contact you any time day or night. Hopefully, you have tenants that will respect your space and your privacy. When you have the right people in place, owning a multi-family investment property can be your key to building wealth through real estate.