How does the 5th unit in a multi-family make a huge difference?

How does the 5th unit in a multi-family make a huge difference?

When you are buying a multi-family property for rent, there is a huge difference buying a four-unit building or five unit or a bigger building. that one unit, the fifth unit makes a huge difference in your purchase. Welcome to Wealthy Wednesday.

Now, let's discuss how that fifth unit makes a huge difference when you're buying a multifamily property compared to a four-unit building.  Now, you know that any property with four units or smaller is considered a residential property. Means, if you decide to live in one unit and rent the other three units or if it's a triplex, maybe the other two units, you can do that. You can actually get the benefit to buy that particular duplex, triplex, or fourplex with a primary home loan. You can buy with an FHA loan if the limit permits with the purchase price or even a VA loan or any kind of primary home loan with a low down payment. And you can buy that property, rent the other units.

But as soon as that building has five units, it is considered a commercial property. This means there are no more residential loans. It has to be a commercial loan. And few things make a difference. The interest rate, of course, on a residential property, obviously,  low down payment, a better interest rate. On the other hand, the fee for the appraisal, normally an average residential property, say, will cost $450 to $500 for the appraisal compared to a five-unit building, almost a similar property will cost you maybe $2000 or $2,500 for the appraisal. Because it's a commercial property, they need to do more research and all that stuff. So that makes a difference. And there are a few other things.

Definitely we spoke about the loan programs that will make a huge difference. The whole loan program, the paperwork and everything, the credit situation, the money in the bank, everything will make a difference. So next time when you're buying a property, either by four units or smaller, if you want to go for a smaller multi-family home, or if you want to buy a commercial property, if you're ready for it, go for a bigger one. Go for 20, 30, or 40 units. But do not buy a five-unit building thinking that you're going to get the same benefit as a four-plex. You will not.

Hopefully, this information is going to help you or give you some knowledge about buying multi family homes. My name is Shawn Bhakta from the Remax Presidential South Florida Home Finder Team, and I'm glad to help. 

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