A second home is a property that the owner intends to occupy in addition to his main residence for part of the year. Usually, second homes are used as holiday homes. Second homes can also be properties that the landlord visits regularly. Financing a duplex or multifamily home can be a smart way to build wealth.
Bankrate's guide covers the differences in classification between duplexes, multifamily units and commercial properties, as well as the different types of financing associated with each. Here's a look at four loan options for duplex and multifamily properties. Buyers of a duplex or multi-unit home can sometimes use the projected rental income of the additional units to qualify for a loan. For those payments to be taken into account, tenants normally must have signed a lease agreement.
When learning how to buy a duplex or other multifamily unit, there are unique features that you won't find with a conventional mortgage. Appraisals may be infrequent, as there may not be as many comparable units in the area. So, if you use a conventional multifamily loan, you could end up having to pay a higher down payment, more than 15 percent for duplexes and 20 percent for multifamily homes (those with three or four units). Multifamily investment differs greatly from investing in a single family or in condominiums.
The obvious advantage is that it allows you to generate multiple revenue streams while generating a constant appreciation of value. Instead of buying a single unit that you can rent, you'll buy an entire house or apartment building. You can choose to live in one of the units and use your income stream from rental units to reduce or even eliminate your housing costs.
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