which is a better investment property rental a SFR or multi-family unit? My brother & I been pre-approved for

Asked by Lyn, California Fri Sep 19, 2008

650,000. He can qualify for FHA but I can also make 5% down. Which financing is better, FHA or conventional?

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Jill Ballard, , San Jose, CA
Fri Sep 19, 2008
BEST ANSWER
Everything is cyclical in Real Estate. In this market, the multifamily will cost you more to buy because that's where smart investors are putting their money right now. The city of San Jose has less than a 2% vacancy rate (other cities in Santa Clara county are probably similar). So that means that if you rent the units fairly, you are pretty much guaranteed renters. You will pay more for the multi family but you will also make more on it. You have to look at the big picture.

If you use an FHA loan, it has to be owner-occupied. Are you willing to live in investment property for at least a year? Also most conventional financing is asking for at least 10% down these days and if it's less than 20% down you are paying PMI.
0 votes
Lyn, Home Buyer, California
Fri Sep 19, 2008
thanks for all your informative answers. I (husband & 2 kids) actually live in a 5 bedroom 4 bath SFR in fremont and my brother is renting out 1 of the bedrooms. My husband, my brother & I been pre-approved for $650000 and considering buying a rental. I have a few friends that loss their homes to foreclosures & they are my prospect renters. I've been checking homes for sale on line & then check it's market value on zillow & some are unbelievably 20-40% off- but this are SFR. how's the appreciation of multi-family units. Also considering SFR w/ IN-law suites for 2 family rentals.
0 votes
Steve Fergus…, , Austin, TX
Fri Sep 19, 2008
I have bought and sold several investment properties and am under contract for another one now. I truly believe that mult-family is the way to go. Here is an example of why:

Single family-you rent the property for $X per month. The renters move in, stay for a year and leave. You made money every month but when they leave. You are now responsible for the entire payment that is attached to that property while its vacant all the while thinking to your self " Jeeze, I hope we get a good renter soon"

Mulit-family (4-plex) - you rent to 4 different renters usually at 4 different times and make money. One renter moves out. Wait, you still have three other renters covering the note for you while you find another renter to take the last unit. You are not "hurting" yoursefl by covering the complete note because you are spreading that note over multiple tenants. This system makes it much easier for you find higher quality tenants instead of jumping at the first renter that comes along.

FHA loan-You can get an FHA loan for multi-family properties over 4 units ie: commercial

Hope this helps
Steve Ferguson
0 votes
Rashid, Home Seller, Santa Clara, CA
Fri Sep 19, 2008
Hello lyn
Let us have a meeting, I will learn from you what are you looking for. You will see what is available in the market. And you make your choose. My email address is rashidk@remax.net or you can contact me if you like on my cell at 408-509-2604.
Rashid kaddoura
Remax Luxor realty
Santa Clara
0 votes
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