House Hacking Larer Buildings?

Question

I have been researching 3 and 4 unit properties in my area, and it seems like the prices are all a little bit high. I suddenly discovered that 5-6 unit properties are better deals than the 3 and 4 unit properties. Can I owner occupy these properties if I take out a commercial loan? I know that I would have to put down 20%, but it seems like it might make more sense and I could get better cash flow. What do you all think?

Anthony Gayden · Answer

I don't see why you couldn't do it. I believe the 5+ unit multifamily is harder to sell because it is harder to finance. Many banks won't do commercial loans on amounts under $500,000 and you can't use a residential mortgage.

Ryan Dossey · Answer

Yes you can. The reason why most people look for the 2-4 unit is the 3.5% down payment via FHA. If you are comfortable with 20-25% there is nothing stopping you from being one of your own tenants.

My concerns would be insurance. Obviously it would be insured like a commercial building. I would also make sure that you have an umbrella policy personally. I would NEVER let the tenants know that I owned it. I would just act as another tenant. Honestly I would even hire PM. You are basically covering your living expenses and cashflowing a bit.

You'll find that 5+ units are harder to sell so often the owners are open to more creative financing/cheaper cost per door.