Investing in real estate, whether living in it or renting it out, is a good way to increase your net worth. What you need to consider is your long-term financial goals, immediate housing needs and if you want the responsibility of renters and all that they entail. Two-family homes are not usually in suburban areas and are often located by themselves or in groups in an area of the city, county or municipality. There are properties on the market that claim they are two family homes so make sure that you check that they are zoned as such before investing.
What is a two family Home?
A two-family05 home or multi-family home can house two or more families, depending on its configuration. Two family homes include duplexes that are configured as two units, side-by-side or at angles to each other. A triplex, quadruplex and apartment buildings are all multi-family housing and a duplex is a good place for investors to start. The important factor is that you can live in one side while renting out the other unit. This will offset your monthly mortgage payment.
For those looking at investment property, a duplex is the least expensive way to test the waters of this venture. With a cost approximately 25 percent higher than that of a single-family home of the same size, depending on where you live, a duplex will give you two units in the same location. This will make managing your property easier.
Will a two family home cost more than a single family Home?
Yes, as was mentioned above the cost is approximately 25 percent over a comparable single-family home. Insurance, taxes and utilities will be higher and if you can keep your occupancy level high and steady, with good tenants, this higher cost should give you a return great enough to offset its initial impact.
How can you get financing for a two family Home?
If you have little cash and you qualify, loans for duplexes and multi-family homes are available from the FHA with a low, 3.5 percent down payment and the income from the other unit will be considered income when you get your loan, giving you more buying power. The catch is you must live in one side of a duplex or one of the units of a multiplex for two years. After two years of steady rental income, you can use this to get a loan for your nest two family home and increase your net worth, even further.
For qualifying veterans, a VA loan is another avenue to the purchase of a two family home. The VA will guarantee a loan on a duplex, with loans available for up to four unit properties. The no down payment advantage, use of potential income from the other unit(s) as an income booster with the added benefit of a home for you and your family and two-unit homes may be in your future with a VA loan.
If your only option is a conventional loan, you will need a larger down payment than that required by FHA and VA lenders. A down payment on a duplex, with a conventional loan, is 15 percent and on a multi-family home, you may be required to put as much as 25 percent down to purchase the property. The good thing, though, is that you may not be required to live in the home and can enjoy the profit from both units. If managed properly, a two-family home is a boon to an investor who buys with an FHA, VA or conventional loan.
Will you get a return on your Investment?
You can in two ways if you can keep the other unit rented. Motels use occupancy rate, to determine the profitability of their businesses and the same applies to you. An occupancy rate of 100 percent will give you the return on investment (ROI) that you want and that will help you get that second property. However, unoccupied rental units will cost you in the short and long term because the steadier your rental income, the closer you will be to your second property.
Just like with any other property, the way to get the best ROI, besides high occupancy, is to keep the property in good repair. This will mean that you will need to put out a little hard work or hire someone that will. You need to consider maintenance costs when thinking about whether a two-family home is a right investment for you. It will retain its value better than a home that is unkempt and run down. A two-family home, with a high occupancy rate that is well-kept, will increase in value more steadily than a single family home.
Is a two family home right for you?
Dealing with renters is an adventure unto itself. There are good ones, bad ones and ones that you hope will never leave. If you have the fortitude to deal with late payments, excuses, needy renters or ones who constantly complain, then living next door will work for you. If you keep in mind that this is but one step closer to another investment property, dealing with the fact that you are still living with a marriage wall between you and the next unit will be easier. After all, that wall is yours now, not someone else’s property.
2 Point Highlight
Investing in real estate, whether living in it or renting it out, is a good way to increase your net worth
Just like with any other property, the way to get the best ROI, besides high occupancy, is to keep the property in good repair.
Related Posts
https://movoto.com/blog/real-estate-concepts/two-family-home-the-rules-of-converting-your-single-family-into-a-two-family/
