Dear Claire, Can I buy a multi-family property as my principal residence?
Today we’re talking about multi-family rental properties and how you can be a rental tycoon! But seriously, rentals are really the only way that the middle class can actually attain any amount of wealth over the long term. If you’re working hourly, you are working hard for your money; it’s close to impossible to have really anything set aside for your future. Real estate is one of the ways to do that, because you can leverage your money in a way that you can’t leverage it anywhere else. Real estate typically appreciates at about 5% a year, at least for the last hundred years. Which is a very reasonable return.
Multi-family houses are like a duplex where there’s one unit and then the unit next door, or like oftentimes in our town, you’ll see an up/down duplex. Sometimes they’ll be triplexes or four-plexes – all of those are considered multi-family. If you get above five units, you cannot get a regular principal residence loan. For four and under you can.
What does that mean to you? It means that anyone can go to a lender and get a normal principal residence loan to buy a multifamily property. Let’s say I qualify for $300,000 single family house, and my down payment is 3% ($9,000). If I can do a little larger down payment I can buy multifamily development. Say I’m looking at a duplex for $500,000, which obviously I can’t afford on my own income, but the lender will consider the income that you would be making from renters, from that other unit, as part of your current income so that you can qualify for the $500,000 property. For the duplex you would need $15,000 for the down payment. Obviously you need a bit more money down but then you’d have another unit that you can rent out. Currently a one bedroom in Portland rents for about $1200 a month. So that rental income significantly offsets your monthly mortgage payment. The other bonus, at least for Portland, is that you can Airbnb a duplex, especially if you live on the premises. So you can make even more money that just having monthly renters. Airbnb can get into much more complicated issues about ownership, investment, risk, and all that fun stuff, but this is the stuff that I kind of live for because it’s really transformative if you can do it right.
Give me a call or email me – I’m happy to chat more about this. My phone number again is 503-998-4878 and my email [email protected]
I’ll see you guys next week. And we’ll be talking further about rentals because this is an endless subject.
Have a great week.