pros on cons on buying a single family house or a 2-family house for 1st time buyers?

Question

I am trying to buy a house, but I am unclear of what will be the benefits of buying a single family house, or buy a two family house. Also, if I buy a 2-family house, when and how can I buy a single family house, keeping the 2-famiy house.

Answer 1

You are a smart person for looking into the possibility of becoming a real estate investor.

The benefit of purchasing a 2 family house (duplex) or a 3 family house (Triplex) is that while you are living in one portion the people living in the other portion is paying you rent. The rent they are paying you can go toward making the mortgage payments.
There are also some tax advantages for you also, called depreciation as well as anything done to your rental to include the interest is dedctable. Check with your tax advisor or cpa.

This is a hard thing to do, but then things that are worth it are always hard. You will have to select and screen potential tenants, run a credit check on prospective tenants, You will also have to, on occasions, evict a tenant.

You can join the Apartment House Association located in your city. They can provide you with rental forms, current laws on land lording and tenants, help in finding someone to run a credit check for you, a little legal advise and other things that would make land lording a bit easier.

You can also build wealth that way. Normally a duplex or a triplex cost a little bit more than a single family house.

With a single family house you live there alone, have the place to yourself without the worry of close neighbors.

As far as qualifying for a mortgage, most lenders consider 1-4 units as a single family unit as long as you live there. Therefore you can qualify with a lot of the 100% financing if your credit score is sufficient enough.

You should contact a mortgage broker to get pre-approved and check out your options as to what you are qualified to purchase. Your mortgage broker will want to compete a loan application after which he will run a credit check. Tell this person what you would like to do, especially about the investment property and simply purchasing a home.

The credit check will give your mortgage broker an idea as to what programs you are qualified for. Based in your income and debts you currently have he will be able to tell you how much house you are can by with the dollars the lender will allow you to borrower. The credit score will also indicate the type interest you will be approved for.

Before you speak with the mortgage broker you should have the following available for the broker

#1. Two years of fed income taxes and W-2

#2. One month of pay stubs

#3. Six months of bank statements from all the banks you do business with, to include any 401-k participation with your employee.

Once you have been pre-approved you can find a real estate agent or your mortgage broker can recommend one for you to seek and find what ever home you have decided to purchase.

Once you have found a property you want to purchase the real estate agent will prepare a sales contract for both you and the sellers to sign.

The mortgage broker will order an appraisal to verify the value of the property. He might also request additional information and documents, not to worry this always happen.

Shortly after he will call you to set up an appontment for you to sign your loan docs after which you may now move into your new property.

Now about when you can purchase a single family house, most lender's to include the FHA and VA require you to reside in the property for at least a year. Now if your job trasfer you or move no one will hold you to that portion of the contract because they can not prevent your from earning a living.

To be frank with you, I have never seen a lender send someone around knocking on doors trying to make an attempt at who is living there as long as you make your mortgage payments on time.

I hope this has been of some use to you, good luck.

"FIGHT ON"

Answer 2

the most important factor you have to consider is how much time both you and your spouse, if you have one, spend working. if you work until you are almost dead, know that maybe a house or a two flat is not a good candidate, and that it may behoove you to buy a condo. if you work very hard, you will not have time to maintain either a house or two flat. if not, then:

always, the most desirable piece of real estate is the single family house. they always sell faster than two flats, and for a higher ratio of sale to asking price. we cannot deny that it is the american dream to have a house of your own, with your own yard, your own garage, and nobody elsewhere inside of it to bother you, can we? if you have children, the SFH is the way to go.

your decision between these two types is not all that bad, however, because usually a two flat is better kept than a three or four. why? because almost always, the owner lives in one of the units, whereas that is not as true when you get into larger buildings. and also, it just is easier to maintain your own unit and only one rental.

no matter which you buy, buy for location, location, location even if it costs you a little bit more now. make sure that the area will keep its value or increase in value. try not to buy on a major street (noisy, not many trees) and not to buy where a large number of big apartment buildings exist, which leads to density and parking problems. you want to buy a HOME on a home street, in a residential area. the more land you can buy with it the better, for air and light space. in fact, the more separated the houses are, the better. if there is one or two large apartment buildings in your area, okay, but go look at how many bells are on each one. this way you can figure out if there are one or two bedrooms per apartment, or are they studios? it can be bad how many people share a tiny apartment. look at the cars parked on the street too. are they generally nice? go to cafes, restaurants and stores in the general location. see how far you walk, see what they are like.

usually, of course, the owner will live in the nicest of the two units. you, though, may be very handy and smart about improvements and therefore choose to rent out the nicer one to a party that will pay you more rent. if you get a garage, all the better: you can rent out one space to your tenant or to someone else.

you will receive a larger income tax return no matter which you choose, single or 2 units, only because you will live in either. that qualifies you to deduct all the interest you pay over each year as well as the real estate taxes against your income taxes.

now then, on a two unit, you can depreciate the unit that you rent out per the square footage (shown on your real estate tax bill under the part called "improved") of the building, not the land. land is not depreciable, ever. depreciation raises the amount you deduct from your income taxes. in addition, you keep every single scrap of a receipt, since repairs are different from capital improvements (landscaping, room additions, anything that improves the building substantially). you should do that because when you buy the 2 flat, you have a cost basis. then via computations, when you sell, you come up with an "adjusted cost basis," reducing taxes that you must pay on a capital gain.

i think that if you are careful where you buy a two unit (in a location where there are primarily single family houses occupied by only one family, and good area attractions like good stores...), your property will appreciate rapidly. then you can borrow against the equity of the property to use towards a downstroke on a single family house. that will probably take you about 10 years. but beware: the total long term debt that you carry has a negative effect against how much you can borrow. talk to a mortgage lender about that.

then talk to your CPA/tax advisor. before you approach a Realtor, you want to have already chosen a mortgage lender that tells you how much you can afford as a purchase price for either type of property (or, a condo). try not to buy when you have a lot of debts that take longer than 6 months to pay off at minimum payments.

when i bought a house, this is the decision making my husband and i applied: since values were rapidly increasing in one area, but the real estate still was cheap, our reasoning was we would buy a single family house in THAT area if the monthly out of pocket expenses would be that of what it would cost us to live in a two flat in a "better," more established, neighborhood. we bought the single family house and never were sorry. the area increased so high in value that we made about 1,000% or more than what we paid when we sold our house. it all had to do with the 3 magic words: location, location, location.

i wish you much happiness and very little aggrevation!

EDIT: Judith is not correct. since you will live in the two unit, it is your primary residence and not considered "investment property." you can get just as much financing on the 2 flat as you can on the single. but if you do a no money down deal on either one, plan to spend a lot for your monthly mortgage!

Answer 3

Go to the website for your local housing authority. They have tons of resources and links. Just Google "Lake County Housing Authority" or whatever your county is. Whenever you want to buy a new house, if you can keep the first one for a rental, you will quickly build your estate. If you use FHA financing, you have to keep a property as owner occupied for one year before you can use it as a rental.

Answer 4

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Answer 5

2 family residence is supposed to be an income producing investment, which can change the taxation rate for you. and you might not be able to get 100% financing on it.
SFR is for residence purpose for you , so there are more options in financing.

Answer 6

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Answer 7

simple. two family offers income after you paid off the mortgage.

single family, more privacy and enjoyable.

question. Do you need the income?