Things to consider with multi-unit rental properties:
- Seminars have great information.
- WARNING: Don't get caught up in the hype.
- Owner-occupied as little as 5% down.
- Rentals: 20% down required.
- Limitations to the total number of rental properties owed.
If you are considering the purchase of a multi-unit rental property...
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Multi-unit rental properties, also known as triplex, four-plex and five-plex's, are the more sought after properties by the average real estate investor and want-to-be real estate investors. Many people want to build a portfolio of rental properties and as a result end up doing a lot of research on the topic. Research is a good thing, however, from my experience most want-to-be landlords focus on the potential profits that you can make as a landlord and completely ignore the potential pitfalls. Absolute fortunes have been made through real estate and rental properties, but fortunes have also been lost. So you need to prepare yourself for the pitfalls before your first purchase.
Over the years I have spoken to many clients regarding the purchase of a triplex, four-plex or five-plex. One common thing that I have found is that landlords that have never owned a rental property before have an unrealistic idea of what is attainable. For example, one common mis-conception about multi-unit rental properties is that you can aquire one property per year for the first ten years and then manage all the properties after that using only the equity to buy more properties. It seems that the biggest contributing factor to this concept seems to be coming from seminars designed for real estate investors.
Seminars are meant to sell you
I have notices over the years that most people that are looking into buying multi-unit rental properties commonly frequent these real estate investor seminars. There is a lot of information that can be gathered at these seminars but you have to ultimately remember that those seminars are designed to sell you on the opportunities in the real estate world -- and there are a lot of opportunities. Don't get caught up in the hype! If it was as easy as they make it sound everyone would be a landlord.
The reality of one property per year
Unless you are fortunate and you're sitting on a large pile of cash, or you have access to a lot of equity in a property that you own, it is unlikely that it would be possible to acquire one property per year. When purchasing rental properties the more you put down the easier it is to make a profit. However, at the same time the more you put down the less properties you will be able to purchase -- it's a catch-22.
Down payment requirements
Depending on the lender used, the down payment required to purchase a multi-unit rental property is between 20-25%. I give a range on this because it will depend on how many units are in the property being purchased. Although it is possible to purchase a multi-unit rental property with less than 20% down (as little as 12%) -- this is on a case-by-case basis. Finally, if you are looking at purchasing a multi-unit rental property and will be occupying one of the units yourself, then it is possible to get that property for 10% with most lenders and as little as 5% down with others.
Why use Jim Thornton for your next multi-unit rental property
I've been in the mortgage business for a long time now and extremely familiar with the programs available for rental properties. Multi-unit rental properties are different from duplex's or owner-occupied properties. Call me and I'll help you get approved for that triplex, four-plex or five-plex you've been looking at. Call today toll free at 1-866-257-0158.