Multifamily properties are properties which have between two and five units. Properties with a single unit are single family properties, while properties with more than five units, such as apartment buildings, are considered commercial properties. Multifamily properties are eligible for several different types of mortgages which can be appealing to real estate purchasers, and they can be a valuable source of income if they are managed properly.
For some home buyers, a multifamily property is appealing because they can live on the property and rent out the other units to generate income. Income from the rentals can be used to manage repairs and other expenses associated with the property, and to pay the mortgage on the property. Other people may view a multifamily property as an investment, renting out all of the units and living elsewhere, possibly on a single family property which offers more space and privacy.
Because they are not commercial, it can be easier to obtain a mortgage for a multifamily property. However, there are some things to watch out for. It is not uncommon for unpermitted modifications to be made to a property, such as turning an attic into an in-law unit, and these modifications can violate the zoning and make it difficult to procedure a mortgage. When looking at multifamily properties, prospective buyers should take care to confirm that everything on the property is legal, as violations can create a major snag in the mortgage application process.
Multifamily loans are offered by most banks which handle residential and commercial loans. While potential rental income may be considered as a factor in a loan application, people should not rely on the prospective income to pay the mortgage. Units aren't always occupied, and expenses for upkeep can be significant, thus 100% of the rent from a multifamily property cannot go to a mortgage. Banks are well aware of this, and they will not extend a loan to someone who does not appear capable of handling the mortgage payments comfortably.
Multifamily listings can be found at many real estate offices. They are often listed separately from residential and commercial property because multifamily properties can be a bit of a special market. A real estate agent can print out a list of multifamily properties in a specific price range and area from the multiple listing service, which allows real estate agents to find properties listed by other agents. It can be a good idea to work with an agent who specializes in multifamily properties to get the best deal.
