Owning a multi-family home has certain advantages that single families and condos do not. For instance, owning a building with two units means there is someone occupying one of the units. If repairs need to be done, this person will probably be willing to help out with repairs since they are living in the unit for free. This guide includes information such as the advantages and disadvantages of owning a multi-family home, how you know when to sell the property, and some tips on how to make the most out of your sale.
What is a multi-family home?
A multi-family home is a house with two or more units. The property will include the building and land that it sits on. For example, if there are two townhouses in one building, then each would be considered a unit. The property taxes and mortgage will be paid on the entire building, not by each unit separately. Keep in mind that the multi-family home may have one or more units.
There are several styles of multi-family homes including duplexes and triplexes. A duplex is a building that has two identical units. The building may be the same size as a single-family house or larger in order to accommodate more units. A triplex is similar to multi-family, except there are three separate units. An apartment complex is considered multiple units when it holds four or more individual houses
Advantages of a multi-family home
Owning a multi-family home has many advantages to single families and condo/townhouses. The primary advantage involves cost. When a person owns an apartment building or two separate houses and they rent out one of the units, then they are able to pay less in mortgage than if they owned a single unit. This is because there will be income due to rent from the vacant unit.
The second advantage involves profit. If someone purchases a duplex or a triplex, then they can either live in one of the units or rent it out. If a person rents out their unit, then they will essentially be living for free while still owning property that has an income.
Another advantage includes interest rates on home loans. Banks and lenders usually offer lower interest rates than single-family homes because there is less risk. If one unit is vacant, then the owner has income from the other unit to cover mortgage payments.
Disadvantages of a multi-family home
Owning a multi-family home does have some disadvantages. The most common disadvantage is the price, which is substantially more than that of a single-family house or townhouse.
Another disadvantage includes repair expenses. The owner may be responsible for fixing routine maintenance on the units. If one unit has problems but not the other, then it will cost the owner money.
A third disadvantage includes obtaining financing. Some lenders will refuse to grant home loans if there is more than one unit in the building for the same reasons listed above. The additional income from a vacant unit does not always justify the risk of owning a multi-family home, according to lenders.
Finally, the state of the economy can affect the sale of a multi-family home. When the economy is better and more people are interested in purchasing homes, then there will be less demand for multi-family units if they are already available in the area. The same principle applies to single-family homes or condos and townhouses.
How do you know when to sell?
The owner must carefully consider when the right time is to sell a multi-family home. It may be appropriate if the owner wants to move into one of the units; this will allow them to pay less for mortgage and not have to worry about repairs or maintenance on an additional unit. However, if you don't want to live in either of the units and are only concerned with income, then it may be wise to wait until the economy is in a better state.
The person who owns the building or houses can also look into their local real estate market to see what the average price of multi-family homes are selling for. If they want to sell at a certain time, then they can base the selling price on the average market value of their area.
If the owner wants to move into one of the units, then they can consider hiring an agent for help. A good real estate agent will be able to find potential customers who are interested in buying a multi-family home or apartment building and willing to pay a certain amount.
When the owner is ready to sell, an agent can list their property for sale and work on getting prospective buyers for the unit. If a person does not want to hire an agent, then they can use classified ads or post notices around town about their property and wait for people to call them with interest. The latter method may take longer because people may get interested in a property while it is still being listed by an agent.
The real estate market always fluctuates, so the best thing to do is prepare for this and be ready. As long as the owner does not need to live in any of the units, they can take their time when looking for buyers.
When it comes time to sell
The first step to selling a multi-family home is figuring out how much money it will cost and what kind of property to sell. It might be best to sell the oldest unit or the one that needs repairs first. This way, if there is an issue with getting buyers for this particular unit, then the owner can wait until another one is ready to sell.
If a person is planning on selling a duplex, then they may want to sell both units together. This way, there are people living in each unit and it will not be vacant for very long. For triplexes or apartment buildings with four or more units, it might be best to only sell one unit at the time.
The factor that will determine how much money a person can make from selling a multi-family home is the location of the property. If there are several other units available in the area and people are interested, then it will not take as long to sell a multi-family home than if the neighborhood is mainly single family homes or condominiums. Location is the main factor of selling a multi-family home quickly at a good price.
Understand the buyer's demographic
Most people that are interested in multi-family homes fall into two categories: first-time home buyers and investors. First time home buyers will typically be younger than an investor. Investors on the other hand can range from anyone including young entrepreneurs to retirees.
The main difference between the two is what they plan to do when purchasing a multi-family house. Investors will usually purchase in order to rent out a unit. First time home buyers will either purchase the home to live in it or they may buy two units and sell one while living in the other.
A person interested in selling a multi-family house should consider who their audience is for several reasons. If an owner wants to attract investors, then they will need to consider the location and make sure their advertising is geared towards investors. If a person wants younger buyers, then they will want to make sure there are families in the area with children that may be interested.
Review leases, occupancy, and tenant rights
The main thing about selling multi-family homes is that there are usually many more legal issues involved than with single family homes or townhouses. It's important for owners of multiple units to protect themselves from beginning to end and while they are selling the property.
If the home has different owners, then it may be possible for all of them to come together and form an operating agreement in order to make decisions regarding how they want to run the building. The only issue with this is if someone wants out and does not want to sell their share of the property.
If there are restrictions with one or more units, then it can cause problems for the owner. If a person is selling a multi-family home in an area where they must follow certain guidelines, then they will have to make sure they adhere to these rules before selling the property.
If there are already tenants leasing one or more of the units in the building, then it is important to understand that they have rights just like any other tenant would. These people do not want to be told when they can move out and what they must pay for their housing situation. They also do not want to be forced out if the owner is selling the property.
In the case of duplexes and triplexes, if there are one or more tenants, then a person selling a multi-family home will need to be able to explain this situation in their marketing and listings. If someone wants to buy a unit where there is already a tenant, then they might want to consider what their lease agreement states regarding selling the property. If the tenant has a right to renew their lease, then it may be in their best interest to force them out.
Work with an experienced real estate agent
When you're looking to hire a real estate agent to manage your buying and selling, it's important to hire an agent who has experience in multi-family dwellings. Most real estate agents have experience in selling a variety of properties. However, some do not specialize until there is client demand.
Unfortunately, many people that are interested in selling their multi-family home will want to save money by doing the marketing themselves or hiring someone who may not be experienced in this field. If an owner makes this mistake, then they are likely to lose out on a lot of potential buyers.
The main mistake that many people make when they try to sell their own property is that they do not take the time to market their property properly. They may have several ads and listings set up with various sites, but without a strong plan in place, it's likely that they will not see many people showing interest in their property.
Have thorough inspections completed
No matter whether an owner of a multi-family home is selling the building or looking to sell their individual unit, there are some things they should do before putting it on the market. Having a professional come in and inspect all of the major systems will ensure that any problems are discovered early enough so that they can be addressed before moving forward with making the property available to buyers.
If there is a problem with any of the systems or features, then this needs to be noted and included in their price for the property. Many people will want to make sure that everything works before they buy a home or condo.
A professional inspection company should have no issues doing an inspection and including all of the details in the report that they give to the property owner. This will save someone a lot of time and money in the long run by making sure everything is working correctly before showing the home or condo to potential buyers.
The multi-family home market is a unique niche that requires an expert understanding of the many advantages and disadvantages. If you are considering selling your property, it may be beneficial to work with someone who has experience in this field. It also pays to know the right time to sell, so keep an eye on market trends and consult with an expert to give you some more guidance.