The decision to invest in multifamily apartments can be overwhelming, particularly if you’re a beginner. However, a basic understanding of this type of investing’s ins and outs may help eliminate the confusion and make the thought of investing as a beginner a little easier to digest. If you start small, financing can be similar to investing in a single-family home. However, investors who hope to acquire larger properties will need to pursue commercial investing. For starters, inexperienced investors should develop an understanding of the difference between commercial and non-commercial investments.
The Duplex or Multi-Family Investment
A duplex is two conjoined homes. Multi-family homes are usually three or fewer residences built together like an apartment complex. Most of us would consider both types of housing akin to tiny apartment complexes. Financing for these types of multi-family residences can usually be financed via FHA or VA Loans. Each of these types of loans has its own set of requirements. This is why it’s a good idea to explore each one extensively to determine which one may be the best option for you. Logically speaking, VA loans are designed to help military people. However, smaller multi-family units have financing options similar to a residential mortgage. Consider your circumstances, needs, and preferences as you decide what the best type of financing is for you. It may help to visit a bank to explore your options with a banking professional as well.
If you’re interested in investing in a larger multi-family property you’ll need to seek commercial financing. A commercial multi-family building has more than four units. If you’re interested in investing in a property that’s larger than three residences your investment will fall under a commercial investment. However, commercial financing is far more rigorous than residential financing. The credit checks are more extensive and there are more requirements to qualify for a commercial loan. Commercial mortgage lenders have a rigorous approval process.
Beginner investors interested in investing in multi-family units should become familiar with their financing options. Smaller units are usually better choices for inexperienced investors because the financing options are similar or the same as residential finding options. IN other words, you’ll be able to seek financing from a residential mortgage lender. Larger units require commercial financing which comes with a much more stringent qualification process.