As a first-time home buyer, you are often confused about what type of property to purchase. Indeed, with many properties to choose from, it can become a tricky ordeal to pick one. However, buying a multi-unit as a first-time home buyer can give you benefits in multiple ways. Read on to find out more.
Advantages of Buying a Multi-Unit as a First-Time Home Buyer
Before we share with you the benefits of buying a multi-unit as a first-time home buyer, let us first give you a quick overview of a multi-unit. Also known as a multi-family home, this type of property houses separate units where more than one family can live. Hence, each unit in a multi-family home has a designated bathroom and kitchen. And most often, they will have a separate entrance, utility meters, and shut-off valves.
Some examples of multi-unit homes are:
- Duplex (with two legal units)
- Triplex (with three units)
- Fourplex (with four units)
Now that you know what a multi-unit is, let’s take a look at the advantages in detail:
California First-Time Home buyer Assistance Programs
California may be an expensive state; however, it offers several assistance programs that make it easier for first-timers to realize their homeownership dream. More importantly, these programs like FHA, high balance, and jumbo loans give homebuyers the flexibility and freedom to buy different types of properties within their price range. This means that first-time home buyers don’t limit their purchase to a single-unit property. They, too, can consider purchasing a multi-unit.
Potential for Mortgage-Free Living
A multi-unit offers home buyers (owners) the advantage of mortgage-free living. If you occupy one of the units and rent out the others, you can bring in adequate rental income from your multi-unit. You can use the passive income to adjust your monthly mortgage payments in part or full. With monthly cash flow, you can pay back the mortgage loan faster than usual.
Another owner-occupied residency benefit of a multi-unit is that while you can have a primary residence plus rent out other units, you are also building equity – value of the property is going up, while the principle you owe is going down, and the difference is Equity. This is a popular investment strategy as it allows you to enjoy the benefits of both real estate investing and homeownership. If done correctly, the return on investment is above the roof!
Ease of Property Management
You’ll never have to worry about property maintenance issues when you live right next door. In other words, you will be conveniently positioned to collect rent while ensuring that your property is being taken care of properly.
When you invest in a multi-unit, you can enjoy tremendous tax benefits. For example, expenses like insurance, property tax, repairs, mortgage interest, improvements, and property management costs can all be deducted.
Your property can also qualify for additional depreciating rental property tax benefits, apart from these standard deductions. This helps offset the cost of property maintenance over time.