Benefits of Purchasing a Multifamily Home

Blog posted On March 31, 2022

Unless you’re a seasoned real estate investor, it’s likely that you haven’t considered purchasing a multifamily home. At first glance, buying a multifamily home sounds much more expensive than a typical single-family purchase. Although yes, most multifamily homes have a higher sales price than comparable single-family homes, they actually could help you save money every month.

What is a Multifamily Home?

A multifamily home is a home with two to four units. A property with more than four units qualifies as a commercial property, which is different than a residential multifamily home. A common example of multifamily homes includes properties located near the beach. You’ll often see houses with different units on various levels – ideal for renting out and profiting. Some key features of a multifamily home beside the number of units are that each unit will usually have its own:

• Address
• Kitchen
• Bathroom
• Entrance
• Utility meter

Benefits of Purchasing a Multifamily Home

• Larger loan preapproval — You could qualify for more than your current preapproval amount because your lender will factor in rental income.
• Additional cash flow – By collecting rental payments on part of a multifamily property, you have a great source of passive income.
• Faster wealth accumulation – With additional rental income and the benefit of greater home price appreciation from a higher purchase price, you will build equity faster.
• Lower net monthly payments – Once you factor in your rental payments, you could pay less on your mortgage per month.

Here is an example of the payment breakdown of a single home purchase vs. a multifamily home purchase.

To learn more about the benefits of a multifamily home purchase, contact us!

*Payment example: If you have $225,000 loan, with a 30 year loan at a fixed rate of 5.0% (APR 5.2%), you would make 360 payments of $1,235.00. Payment stated does not include taxes and insurance, which will result in a higher payment.

** Payment example: If you have $475,000 loan, with a 30 year loan at a fixed rate of 4.8% (APR 5.0%), you would make 360 payments of $2,608.00. Payment stated does not include taxes and insurance, which will result in a higher payment.