Advantages & Disadvantages of Multifamily Homes
With more and more millennial home buyers deciding not to buy their first home due to the higher cost of living and student loan debts, multifamily homes may be the answer for some. There are several advantages and disadvantages that come along with buying a multifamily home in Madison, Wisconsin.
When purchasing a home seems to be out of your budget, you may need to get a bit creative. Buying a home that's also an investment property could be the solution. Let's look at the advantages and the disadvantage that come along with buying a multifamily home in Madison.
Advantages of Buying a Multifamily Home in Madison
With a multifamily property, you'll gain many advantages. Here are a few of the top benefits of buying this type of property.
Your Mortgage is Paid For
Probably the biggest advantage and the reason many millennials might choose to buy a multifamily property is the built-in rent income. Since you can buy a duplex or even a larger multifamily property and rent out the unit(s) you're not living in, you can get your mortgage paid for. Even if the rent doesn't cover the entire mortgage, it will likely cover a large portion of it.
Depending on the market, you may need to include some of the utilities in the rent. However, this means you'll likely get to charge ab it more, too.
Ability to Build Wealth
Buying a multifamily home allows you to start building wealth. Living in one of the units is a start, but you can continue to save towards buying your own home. When you reach this point, you can move out and rent out both units allowing you to create another source of income, along with building wealth within the actual property.
Better Control Your Rent
Since you will own the home, you won't really pay rent, but you'll be able to control the rent cost for your other unit(s). If you were renting and the rent went up, you'd be responsible for the additional amount. However, as a landlord, you get to be on the other side of the equation and raise the rent when it goes up.
Disadvantages of Buying a Multifamily Home in Madison
While there are several advantages to buying a multifamily home in Madison, there are also some disadvantages. These include:
- A higher cost - Compared to buying a single-family home, multifamily homes are often more expensive. It's not usually a huge hike in cost, but you can realistically expect to pay about 10% more compared to a single-family home with the same amount of space.
- You'll be a Landlord - Not everybody is cut out to be landlord, but if you do a good job screening your tenants, this job isn't so bad. Just make sure you understand the tenant-landlord laws.
- Possible Vacancies - It's possible you could have the additional unit(s) sitting empty at some point. Vacancies can happen, but a good emergency fund can help get you through until you get a new tenant in the unit(s).
Buying a multifamily home in Madison may provide a great way to own instead of renting. It will likely require more insurance, but these are things you can factor into the rental cost to keep your overall cost very low.
If you're considering buying your first home and you're worried about the cost, consider buying a multifamily home in Madison. With the right real estate agent helping you, it's possible to find the right property for you and your family.