Novice real estate investors are usually encouraged to start with single family homes. Larger apartment buildings tend to cost more money and come with more complexities that require experience to manage. However, there are ways for real estate newbies to go the multi-family route and see significant profits.
Many people think of large apartment complexes or high rise buildings when they think of multi-family units. Smaller residential properties with two to four units are a great option for first time reinvestment. Mortgage lenders traditionally view these units as residential real estate, as opposed to commercial real estate. Securing financing for residential real estate is generally easier and comes with less requirements. Furthermore as landlord to fewer tenants, your workload may not require hiring a property manager.
Living for Free
Consider living in one of your units and renting out the rest. You may be able to structure the rent in such a way that your tenants cover the costs of owning the entire multi-family unit. You can save your money to invest in another purchase. Moreover, since you live in the unit, you would qualify for an FHA loan which has one of the lowest down payment requirements, allowing you to invest the extra money you save elsewhere.
Do Your Homework
An expert like Steven Taylor would tell you to thoroughly research the market and the area where you plant to invest. Owning a duplex or triplex might seem like a no-brainer, but you want to be sure you’re investing in an area where people are likely to rent a home. Research the employment and economic trends in the location. Check to see if the population is growing. Are there are lot of people renting or buying in that neighborhood? Other statistics like school performance, crime rates and walkability are important things to know before spending money.
There are many paths into real estate investment. Smaller multi-family units are good options for first time investors. Many options are available to help you save money by putting less money down and/or living free.