When trying to find a place to live, people are sometimes faced with the option of buying or renting. Some may choose a rental property because they do not realize that there are ways to invest in property without going over their budgets. A multifamily residential property allows people to save on a variety of expenses, so it is an option worth considering. More importantly, there are ways to invest in these properties without putting up a lot of money upfront.
Investing Through Loans
If you want to invest in property, a loan can be the best source of funding. A federally insured load, such as those provided by the Federal Housing Administration (FHA) offers a few advantages. With the FHA loan, you can put down 3.5% of the property’s purchase price. You will not have to come up with the closing costs out of pocket, which can be difficult for some buyers. This can be a part of the total loan amount as the FHA also offers a seller’s assistance of 6%. This feature of the loan decreases the overall amount that the buyer has to come up with. More importantly, these loans are available for different types of properties. If you have an interest in buying a multifamily residential property, the FHA loan could be helpful.
Buying a Multifamily Home
If you want to purchase a multifamily property to rent out the units, getting a loan through the FHA will be beneficial. Consider a duplex that is being sold for $200,000 in an area where the rent averages $1,000 per month plus utilities. With an FHA loan the monthly repayment would be roughly $1,200 monthly. If the buyer is able to rent each unit for $1,000 monthly, that is a healthy profits after making each loan payment. The buyer may also choose to occupy one of the units or to rent out a section of that same unit. That extra money can go to maintenance or savings with no additional housing costs for the owner. After the loan is fully repaid, the building owner will have a steady stream of income.
Using an FHA loan to buy a multifamily property lowers your own overall expenses, and you will not need to pay rent. Be sure to choose an area where you will not have difficulty renting a unit. Property that is near to business zones or universities is always a viable choice.