Many first time buyers are understandably concerned about taking on the responsibility of a 20 or 30-year mortgage. This often leads to the purchase of a multifamily home in order to calm their fears and make the monthly payment seem a little less daunting. Instantly becoming both a homeowner and a landlord may work out successfully for some owners but it is not necessarily the perfect option for everyone. There are many reasons why single family homes are much better solutions for inexperienced buyers.
Increase in Responsibility
Previous renters are often overwhelmed initially with the amount of work that is required in properly caring for a home of their own. This workload is multiplied when they are also managing the property for their tenants. It is possible to put off many maintenance tasks in your own home until more money is available, but this is not the case when acting as a landlord. It could cost the homeowner rental income and even potentially lead to legal issues.
Higher Home Expenses
Multi-family homes are usually larger than single family residences and could mean a higher purchase price. In addition, the cost of municipal services like water, sewer and trash pickup will increase. Property insurance for rental spaces is also much higher than basic homeowner's insurance. Yes, the rent is factored to include all of these expenses, but the bills will still be due on the same date even if the rental unit is empty for several months or the tenant is slow to pay.
Reduced Lifestyle Flexibility
Every decision made about the home and property will now include considering the tenants too. This includes throwing a party, a romantic backyard barbecue or even something as seemingly minor as adopting a pet. Home renovations and additions will have limitations based on current leases. It may even become a problem if the need to sell quickly and relocate for work or other personal reasons arises.
Purchasing a multi-family home reduces freedom and privacy. These are two things that many renters state as to why they chose to purchase rather than continue to rent. It also increases the amount of maintenance and expenses and is never a guarantee of any extra income. Even the most carefully-chosen tenant could become someone that eventually needs an eviction notice to remove. Many rental situations work out wonderfully and can be financially beneficial. First-time buyers will need to at least consider all of the scenarios to decide if the extra work will be worth the effort or if a single-family home might be a better solution.