Your first buy - a multi-family home?
Thursday, October 26th, 2006
We talked yesterday about the house versus apartment choice. Let’s extend this to the first purchase decision. Does buying a multi-family home make better sense than a single house?
The disadvantages :
- On a per home basis, multi-family homes are cheaper. But the total cost is likely to be higher than a single house, which means larger down payments and instalments.
- Typically, multi-family homes are mid sized - you won’t have the flexibility to add a super sized jacuzzi or additional rooms as you please. Starter homes on the other hand, do allow this flexibility - a build as you can afford it route.
- As with all apartments, you don’t have the kind of privacy and personal lifestyle choices that you could have in a private residence.
The advantages :
- You’ll have one or more rentals coming in to help pay the monthly mortgage payment - there are situations where you effectively live rent free, if the property is larger or the rental values are exceptionally good.
- Financing terms are usually better for multi-family homes. Banks prefer the stability that comes with more than one paycheck paying the bills.
- Costs pro-rated are a lot less - you don’t need six sets of roofing repairs for a six-family home, just one. Or foundations. Or anything else of the like.
- Pricing tends to be rational. Since most buyers / owners of multi-family properties do it for the rental value, there’s a lot more sanity in the pricing and terms. This usually translates to a better value buy
Let’s hear from you on this. Which would you choose - and why?
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