Buying a Duplex, Triplex or Fourplex Now.

I have recently been watching a show on Netflix.com called Income Property. The show's host, a contractor, helps property owners update or build an income suite or unit to gain rental income from their property. It is a fun show to watch while I am doing the dishes or some other mindless task.

The show reminded me of why adding income to your primary residence is such a beneficial idea. Many of the home owners on the show end up having a large proportion of their mortgage paid for by the income producing unit.

A recent blog on WSJ.com promoted the idea that Millenials should hold off on home ownership. I have shared my opinion on why Young Professionals should consider skipping a home as their first purchase and going directly to a duplex, triplex, or fourplex. 

As I write this in March of 2015 two factors make this a compelling idea. 

First, the availability of financing makes this very attractive. Through the FHA 203(b) loan program, purchasers of their principal residence can buy a 1-4 unit property with as little as 3.5% down. Here in Contra Costa County, where income properties range between $350,000 and $600,000, that would amount to a down payment in the range of $12,250 to $21,000.

Freddie Mac and Fanny Mae the two largest buyers of mortgages consider a property to be residential if it has 1-4 units. This means that you can qualify for a "conventional" mortgage on these types of properties. Freddie Mac allows you to borrow up to 80% of the properties acquisition price. 

This type of leverage is unavailable on other property types or for pure investment properties. 

Second, duplexes, triplexes, and fourplexes are able to receive 30-year fixed rate financing. That means that your principal and interest (the P and I in PITI) are locked in for 30 years. An investor with a long time horizon will see the equity in their property grow as well as maintaining constant mortgage payments. 

Currently, rates are still below historical average. You can lock in 

The combination of available financing and low fixed rates make this a great time to buy a duplex, triplex, or fourplex as your first home. It is a way to jump start your real estate investment process.