All Forum Posts by: Joseph Farnworth

@Joseph Farnworth,

I’d talk to a trusted mortgage broker first (different than someone that works for a bank or credit union). They have all the answers you are looking for when it comes to how to buy a duplex and what it will take financially (types of mortgage, down payment, etc). A good agent is going to send you to a mortgage broker first anyways before going into details of what you want. You’ll get preapproved  which basically means you are tentatively good to buy up to X amount. Once you have that, a good agent will take you seriously and will start searching for you.

A good mortgage broker that does a lot of business will know good agents to refer you to. They don’t get paid working with bad agents, they only have good relationships with top agents. They’ll send you over to someone who knows the area and understands the lending of buying multifamily and can negotiate well on your behalf. They’ll care more about their relationship with you and your financial goals than they will about closing a deal and treating you like transactions. Be very careful who you work with, things are slow and bad agents will tell you whatever you want to hear.

In this business, it’s who you know, not what you know. Having knowledge helps a lot, but having the right people on your team is vital.

I know your question was knowledge-based but I highly encourage you find an investor-friendly lender first! Go to someone you know who is an investor in the area you might want to buy and ask who they use. Or attend a local REI meet up and ask there.

Hope that helps!

Multifamily properties with 2, 3 or 4 units may be purchased as owner-occupied homes, as opposed to investment property, if the buyer will occupy one of the units as their primary residence (typically within 60 days of closing). As an owner-occupied buyer, you may qualify for more favorable mortgage rates, and low-downpayment programs, including FHA financing and conventional mortgages. If a buyer is purchasing a 1–4-unit property that they are not going to occupy themselves, as their primary residence, they may still qualify for a 30-year residential mortgage, but typically at a higher interest rate and with a larger down payment. Properties with 5+ units are typically financed through commercial real estate lending, business loans, or alternative funding sources.

You will want to find an experienced agent, with multifamily experience, in the area that you want to purchase. You'll also want to work with a good lender, who also has experience financing similar types of properties to owner-occupied or first-time buyers. The agent should be able to connect you with a reputable lender. 

There are a number of details that are different from a single-family home purchase, none that complicated, but important not to overlook. In order to occupy one of the units after closing, you'll need to make sure that one of the units will be vacant, or that you can legally give notice to one of the tenants to vacate. The zoning is another important factor. Sometimes single-family homes are converted into a duplex or something like a detached garage is converted into a guest house, and in doing so, the property no longer conforms to its zoning. Those are just a couple examples, but an experienced agent will be able to help you through the process. Buying a duplex, where you can occupy one unit and rent the other, can be a great way to acquire your first investment property, which you can hold onto and rent both units when you are ready to purchase your own home or another multifamily property in the future. 

@Joseph Farnworth

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