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Multi Family Property Living
By: Cameron Brown
If you’ve ever been married and going to school at the same time, chances are
you’ve had the wonderful experience of living in a multi family apartment or
house. While most multi family properties are designed to allow the peaceful
coexistence of many families within their separate units, some apartments and
houses give you the feeling that you’re actually living in one big family.
Things like sharing one washer and dryer between five families means you never
know whose underwear you’ll have to fish out of the washer before you start your
own laundry. And a shared water heater means that now there’s an incentive to
early morning classes. Catching the ‘Cosby Show’ every night at seven through
your living room wall keeps you conveniently updated on the latest goings-on in
the Huxtable home.
While living in multi family housing may not be an ideal situation for some
tenants, it can be a way to wealth for the person collecting the rent. My own
landlord, also currently a college student, manages several properties for his
wealthy, out-of-state family, collecting a handsome property manager’s fee in
the process. Sure he had to evict the people upstairs, replace the roof,
renovate the unit next door, and perform other sundry tasks, but at the end of
the month, he’s got another $2500 in the bank.
One time while he was fixing a clogged drain at our place I asked him how his
family got to be so successful in the multi family investment property business.
He told me that his family hadn’t always been the housing barons they are today;
after scraping together everything they had, even borrowing from extended
family, they still had to take out a substantial loan from a local bank. With
this they bought their first multi family property-an old duplex three blocks
from the university. Although the location was great, being as close to campus
as it was, the purchase had depleted the family’s financial resources to the
point were they had to move into the property while renting out the other half.
From this experience, my landlord’s family gained some useful insight into multi
family apartment financing.
Several weeks later I had the opportunity to speak with my landlord’s father,
the owner of the property my wife and I were currently living in. While
enquiring about his investment property business I learned a little about multi
family investment property financing. According to him, most lenders will only
provide financing for multi family dwellings of five units or more, with a
minimum loan amount of $500,000. Apparently it isn’t worth a lender’s time to
finance smaller investments.
Most multi family or apartment loans have a thirty-year term with interest rates
ranging from 4.7% to 6.625% for loans up to $3 million. I learned that most of
the time these “smaller loans” carry a little higher interest than loans
exceeding $3 million and are termed as ‘recourse’ loans; in other words, if you
default on the loan the lender may take ‘recourse’ by seizing your private
assets. Loans in excess of $3 million are termed as ‘non-recourse’, meaning
private assets are protected in the event of a borrower default. In addition,
most lenders offer basic options like fixed and adjustable rate loans.
In the final analysis, the key to the success of this family in the multi family
investment property market wasn’t the way they quickly handled tenant complaints
or provided decent amenities; these things merely kept them in business. The
reason for their success was a thorough understanding of investment property
financing gained from years of research, experience, and trial and error.
About the Author:
Cameron Brown is an internet marketer specializing in investment property. For
more information on multi family apartment financing, please visit http://www.sncloans.com/multi-family.html
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