Why Invest in Small Multi-Family Properties?

Are you a real estate investor looking to expand your portfolio or get started? Have you ever considered investing in multi-family homes in Boston, Quincy or Worcester and Fall River? People ask me all the time if they should invest in multi-family properties. If you’re one of them, my answer is absolutely yes. But how do you know whether this opportunity is the right one for you?

To help you understand that part, you first need to understand the many benefits that an investment in multi-family properties bring.

Benefits of investment in multi-family properties

  • a) Investing in multi-family properties is one of the most powerful investment strategies you can use to create wealth through a consistent cash flow month after month. If you don’t have a huge invest budget, it’s advisable to start by investing in owner occupied small multi-family homes.
  • b) When managing multiple properties under one roof it becomes easier compared to managing multiple single-family rentals located in different locations.
  • c) An investor also enjoys economies of scale by spreading the fixed costs over an increased number of units. Property expenses and holding costs relating to an apartment building are typically far less than a portfolio of single-family rental properties because there are multiple units under one r oof.
  • d) In addition, property taxes, insurance, and management fees are generally fixed and the cost to replace the roof of a single-family home or a small apartment building that has six units under one roof are relatively the same.
  • c) As the number of rental units increases, income is increased while reducing your cost, making it more cost-effective than multiple single-family rentals.

Another common question that people ask is whether you can use your monthly cash flow to pay the property’s mortgage. The truth of the matter is, lenders typically offer more favorable loan interest rates to those purchasing a primary residence.

Financing of Owner Occupied Multi-Family Properties

When you own 1-4 units of owner occupied multi-family properties, it can be much easier and more attractive to finance than even single family homes, which are purely to be used as investment properties.

As an investor in this type of investments, it can mean a smaller down payment (or even 100 percent financing), better interest rates and easier loan qualification requirements.

In addition, mortgage lenders tend to give generally favorable loan interest rates and lending terms for primary residence mortgages. As an investor, because your primary residence will be owned and occupied by you, your lender will assume it will be better cared for than it would be as a rental residence.

In order to be perfectly clear, there are three loans that are more common than almost any other type of financing for owner occupied multi-family homes. They include;

  • FHA Loan
  • VA Loan
  • Conventional Loan

Managing Owner Occupied Multi-Family Properties

Easier financing, property management convenience, and free living are just three major reasons why owner occupied multi-family real estate investing is a strategy that has the potential to benefit you.

For beginner investors, it can be a great way to ease into a first investment property, where one gets to learn how to manage a rental property on-the-job.

You’ll never be stuck guessing about what is going on with your real estate investing holdings. You’ll be right next door, conveniently positioned to collect rent and make sure your property is being taken care of.

Investing in passive income can be a great way to secure future financial freedom, but keeping track of your property from afar can lead to an increase in issues. When you live right next door, you’ll never have to wonder whether or not your property is maintaining good shape.

When tenants know their landlord is living next door, they will be more likely to treat the property as if it was their own.

Common Owner Occupied Multi Family Real Estate Drawbacks

  • Tenants could be difficult to work with
  • It can be hard to find prospective renters
  • Conflicts of interest may occur

How To Start Investing In Owner Occupied Real Estate

Investing in owner occupied multi-family real estate is a great way for new investors to enter the real estate market. If you’re not ready to purchase a fix and flip property or apartment complex, consider investing in a duplex while renting out half of the unit. Best Cities to invest as owner-occupied are Gateway cities, such as Worcester and Fall River in Massachusetts. They almost guarantee rent free scenario, while Boston, Dorchester, Quincy, Chelsea or Malden are best for appreciation game. 

It’s a step in the right direction of starting a successful real estate business or just passive income stream and you get to learn along the way.

To start investing in owner occupied multi-family properties, create a list of your “must-haves.” Mind your due diligence and make sure you have the proper financing in order before diving in. Working with a realtor who specializes in multi-family properties can also be helpful.

Who Am I Looking To Meet On This Journey?

I am looking to collaborate and partner with new investors who are looking to start buying small Multifamilies for Cash- Flow or Appreciation, depending on the location in Massachusetts. We can build more abundance through simply getting started acquiring small 2-4 units properties and enjoy all of the above benefits while getting closer to becoming wealthy though real estate. 

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Let’s summarize this with a real estate investment quote by Andrew Carnegie who once said “Ninety percent of all millionaires become so through owning a real estate”.

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