Buying Multifamily Housing with Low Down Payment

Is multifamily housing right for you?

We are constantly told that investing in real estate can help build long term wealth. And while this can be true, there is isn’t necessarily one “best” way to invest in real estate. For many buyers that don’t need a big home to live in, buying a multi-unit property can be a great way to leverage real estate investing. Multifamily housing can be an amazing way for first time buyers and others to go big with their real estate investment early.

If someone is willing to live in one of the units of a multi-unit complex as their primary residence, there are a couple different low down payment options. This typically applies for anyone looking to buy a 2 unit (duplex), 3 unit, or 4 unit complex which qualifies for residential financing. Anything larger than 4 units ends up being treated as commercial or multifamily in most cases.

How many units, and what size down payment?

If you live in the building, FHA allows financing up to 4 units with as little as 3.5% down. This can be very advantageous for a buyer to buy a $500,000 property with less than $20,000 and get up to 4 units. For example, in a fourplex, a buyer moves into one and then they have 3 other units to potentially generate income for them. If buying a 3-4 unit property with FHA, buyers need to be careful of FHA’s self sufficiency rule.

Similarly, if you can qualify for Home Possible, you can put down as little as 5% down on up to 4 units. To qualify for Home Possible you need to purchase a home in a low or moderate income area, or your qualifying income must be less than the area median household income. Many are often surprised by how many areas are included and how high the income levels go so we close many Home Possible loans. Even if you want to buy with a conventional loan and you can’t qualify for Home Possible, you can buy a duplex with as little as 15% down and a 3-4 unit property with as little as 25% down.

The bottom line is: if you’re considering purchasing a home to move in to but would also like to create long term wealth, consider talking to us about financing multiple units. It could be the perfect fit for you!