Buying a multi-family home and renting out one unit to compensate for your mortgage sounds like a good plan. For many people, it is a good plan — but not for everyone. Rather than find yourself in over your head or in an unpleasant solution a year down the road, make sure you're able to face the following challenges of owning a multi-family home before you buy:
Challenge #1: You may not be able to live in your desired neighborhood.
Some neighborhoods tend to have multi-family homes, while others only have single-family homes. Make sure you know where the multi-family homes are in your area, and verify that they are places where you would not mind living. Are you willing to drive an extra 10 minutes to work or live further from your friends in exchange for the rent you'll earn? If you do not like any of the neighborhoods where multi-family homes are available, you may be better off buying a single-family home in the location you do like.
Challenge #2: Living near your tenants can be awkward.
If your tenants fall behind on the rent and you have to "chase them down for it" or if you end up in any other type of disagreement, living next to them can be awkward. You can reduce the risk of running into this situation by screening your tenants carefully, but you can never be 100% certain. If the idea of living next to someone you're not quite getting along with — and maintaining a professional relationship through it all — seems too overwhelming, then you may want to reconsider your plan to buy a multi-family home.
Challenge #3: Coming up with the money up-front could be difficult.
A multi-family home will usually cost more up-front than a single-family home. While you will make up for the higher monthly payments by bringing in rent, you still have to get approved for the mortgage. If the bank won't lend you enough money to buy a multi-family home, you may be better off buying a single-family and building up equity for a few years. You could also wait another year, save a larger down payment, and re-apply.
Living in a multi-family home can be cost effective, but you need to get approved for a mortgage, be able to deal with tenants next door, and be willing to live where multi-family units are available. If you can rise to these challenges, ask your real estate agent to start showing you multi-family homes today.
Share17 April 2019
When I started looking for a new home, I realized that there were a few things I needed to be careful about. For instance, I really needed to focus on finding a home that would appreciate in value, so I began thinking about investing in the right property. After quite a bit of research, I was able to find a great neighborhood that had a big support system for my family. After we found a house we loved, we worked with a real estate agent to procure it, and it was really nice to feel like we belonged somewhere. Read this blog about ways to find amazing pieces of real estate the first time around.