Multi Family
There are many ways to invest in real estate. For the beginner, a good strategy might be to purchase a multi family unit to rent out. Four families or less per building is the ideal size to look for. This will allow you to acquire the property with a residential mortgage, taking advantage of the lower interest rates. If you are a first time buyer there are many low down–payment plans as well, another option may be to purchase a duplex style home and live in one side and rent out the other to offset some of the costs.
You will want to ensure that your properties are cash flow positive right out of the gate. If you are considering being an investor, you might as well purchase a unit that has more than one tenant option. If you purchase a single family house and the tenant skips town, you have to cover the entire mortgage payment until you get it re-rented. With a multi family, it would be highly unlikely that all of your units would be unoccupied all at once, giving you a bit of a cushion. If you have a three to four unit building, having one tenant gone may not even put you in negative cash flow! This could make all the difference in the world for your yearly profit.
Multi family units typically bring in more cash per month. Depending on your market, duplex or triplex properties can be around the same price as a single family house. However, you can typically get more rent from two units than a single unit providing money per month for approximately the same mortgage payment. Allowing for a more positive cash flow – the most important aspect of real estate investing!
Repair costs per unit average out to be less. If you have 3 single family homes and need to replace the roof on each one, the repair cost per unit is much greater than than if you have a triplex. Same thing goes for maintenance; it’s less travel time to go from unit to unit, maximizing labor costs.
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