What are the drawbacks of buying a multi-family residence?

Asked by Trulia Roger, Alameda, CA Thu May 31, 2007

In Northern California, you can pay $760K for a single-family home and $900K for a 4-unit residence. The rent would cover the difference in mortgage and property tax. Are there any particular drawbacks to owning a multi-family home as opposed to a single-family home?

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5
Dominique B…, Agent, San Jose, CA
Fri Jun 1, 2007
BEST ANSWER
Another thing for you to keep in mind is that multifamily homes takes longer to sell and they don't appreciate as well as single family homes. Besides that there is different types of financing rules that apply, most likely that it will have higher interest rate and possible a larger down payment requirement.
1 vote
Barry Miller, Agent, Amherst, NH
Fri Jun 1, 2007
The main one is Tenants...remember its your home not theres and they are going to treat it like that. You will be constantly fixing, repairing and paying for upgrades.
Make sure you are getting mortgage plus at least 10%. Good Luck!
1 vote
Pacita Dimac…, Agent, Oakland, CA
Fri Nov 21, 2008
From a financial point of view, someone can borrow a higher amount for an owner-occupied investment property than when buying a single-family home. The reason is that the lender factors in the income generated from the rental unit. That in itself is a big plus --- to have help paying off the mortgage.

More pluses: maintenance of the grounds, the building, the infra-structure can be partially itemized and written off as a cost of doing business or operation.

In these troubled times, it helps to have a tenant who helps pay off the mortgage.

You must be knowledgeable about landlord/tenant laws so that you know how to handle situations involving selection of tenants, raising rent, proper notification, eviction if need be.
0 votes
Serena Russe…, Agent, FREMONT, CA
Thu Nov 13, 2008
Hello Roger,

It is still possible to buy one at a bargain, since many have been sitting on the market. And it's a hot rental market. If you crunch thenumbers, you many find what it takes to make a positive cash flow so you are coming out ahead each month. If you screen your tenants well, you should not have too much propblem with 'bad tenants' and especially if you plan to stay active in managing the property. If you cannot manage it, then you would need a property manager, and pay them a fee.

I am an experienced property manager, with more than 10 years. Let meknow what area you are considring to buy (Alameda and Oakland are very good rental markets for example).
0 votes
Ce, Both Buyer And Seller, Oakland, CA
Fri Jun 1, 2007
With the prices of real estate in California, you may be negative on your monthly after all is said and done unless you pay a big down on the property.
0 votes
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