Melissa Donnahoe, broker / owner

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By Melissa Donnahoe

Why a duplex or a triplex makes an excellent first investment

Multi-family housing

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Why would I pitch a multi-family investment property to a young couple searching for a new home?

Because purchasing a triplex or duplex you’ll live in is a great way to jumpstart your real estate investment journey.

Hear me out.

The Traditional Model

Let’s say this couple finds a single-family home they’re in love with. It’s a beautiful three-bedroom, single-family house in a great neighborhood in Coral Springs. It has a great backyard and enough space inside to fit their needs.

The house is on the market for $450,000.

In order to afford this three-bedroom beauty, the couple must have some money for a down payment. If they qualify for a conventional loan, which requires at least 15% down, they’d need $67,500 in the bank.

For Federal Housing Administration (FHA) backed mortgage, they only need only 3.5% or $15,750. That’s a great starting investment for their first home.

The Multi-Family Investment Strategy

Now let’s imagine they find a duplex for sale in that same neighborhood in Coral Springs. The asking price for the duplex is $700,000.

The two homes in the duplex each have three bedrooms. The couple realizes they could easily live in one of the homes with the same amenities they loved in the single-family home. Only now they could rent the other half of the duplex. As owners of the property, they’ll have long-term income that will help them grow their investment options.

A conventional loan on the duplex would require a $105,000 down payment at the lowest end. That 15% down payment also would mean a higher interest rate plus the added cost of mortgage insurance. All that amounts to an incredibly high bar for most young investors.

However, because they plan on living on the property, the couple will qualify for an FHA-backed loan, requiring only 3.5% down. Plus, their lender will consider 75% of what the other home will rent for as income when the lender is qualifying them for a loan.

The Projected Income

Let’s say similar three-bedroom homes in the area are renting for $2,200 a month – which, by the way, is pretty conservative in South Florida’s current rental market. The lender will consider $19,800 a year as part of their future income.

That $2,200 in monthly income is almost 70% of what their monthly mortgage payments would be on a 30-year FHA mortgage.

There are loan limits of $864,600 for this option, so there is a definite ceiling to this investment strategy. But Coral Springs and other cities in South Florida like Fort Lauderdale and Pompano Beach offer an array of quality duplex and triplex properties for sale. There are plenty of opportunities to find a property that will fit the needs of the future homeowner and the new investor.

Are You Ready to Invest?

Becoming a real estate investor and purchasing multi-family homes isn’t for everyone. However, if you’re interested in researching potential options, give me a call. I’m a real estate investor too, and I specialize in multi-family properties. I know the local area, and I understand the best way to make your real estate investments work for you.

Let Royal Empire Realty help you take the first step in building your Empire.

Headshot of Melissa Donnahoe

Melissa Donnahoe is the Broker/Owner of Royal Empire Realty, powered by SELLSTATE. She was born and raised in Florida and is extremely familiar with the area and the ever-changing real estate market. She has worked in both Residential and Commercial Real Estate and has been involved in hundreds of transactions.

She is not just a Realtor, but an investor as well. She works with other investors to show them how to leverage their time and money through her knowledge, experience and amazing team of professionals.

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