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Should you get a mortgage to buy a multi-family property?

[Jul 6, 2011.]


Buying a multi-family home can be a smart investment. But before you begin shopping around for a two-, three- or four-unit building, make sure you know exactly what you're getting into.

Can you get a mortgage loan?

When you apply for a mortgage for a single-family home, your credit score weighs heavily on mortgage lenders' decisions about whether to loan you money. With a multi-family property you'll need to show that any rents coming in will cover the mortgage debt. If the numbers don't add up, you'll likely be turned down by mortgage lenders even if you have a high credit score.

You, the landlord

You're got your work cut out for you when purchasing a multi-family property. Not only will you have to maintain your own unit, but you'll be expected to handle any problems or complaints that come up with tenants. It won't matter what else you have going on. You'll be expected to respond promptly.

As a landlord, you'll need to have money set aside for maintenance and repairs. Even if you are handy, there will be times when you'll probably need to hire help. You'll also have to spend time taking applications for rentals and doing background checks on prospective tenants. There also could be periods where rental units sit vacant, which means you won't have that income coming in to put toward the mortgage loan payments.

Your home, your business

To be successful with owning a multi-family property, think of it as a business. You'll have to spend time researching the rental market in your area to be competitive. Record-keeping may also take time away from other pursuits.

Do you want to be bothered?

What kind of personality do you have? Are you a social butterfly who enjoys meeting new people and won't mind having strangers living in close proximity? Or are you more prone to be annoyed when people are too noisy, too messy or annoying in other ways? Owning and living in a multi-family property may not be the best move for someone who doesn't enjoy interacting with people much. Honestly evaluate your temperament to decide if becoming a landlord is a good move.

Compare mortgage loans

Whether you're interested in a single-family or multi-family property, it is important to compare mortgages to find the best deal. You can being shopping for a mortgage loan here.


About Author:

Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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