Should You Buy a Multi-Family Home? 6 Pros and Cons

Do you aspire to be a landlord, from the comfort of your own home?

Depending on where you live in this great big country of ours, you likely have several options when it comes to buying a house. I live in a neighborhood (and indeed, a city) full of multi-family houses, and in fact, I currently live in one as a renter.

While I am intending to buy a single-family home in this area (we have plenty of those too), if you like the idea of owning a home that could also be an investment opportunity, buying a multi-family house to live in (which has also been called "house hacking") could be right for you. Let's have a look at some pros and cons.

Pros of buying a multi-family home

Here are the bright spots to look forward to if you decide to make an offer on that charming two-family house for sale up the block.

Pro No. 1: You can be a landlord in your very own home

One way to make renting out a property to other people easier is to actually live on-site yourself. If something goes wrong in your rental unit, you're right there to fix it (or call someone who can), and can have the peace of mind that comes from knowing that a water leak or other problem isn't going untreated. You'll also have the opportunity to get to know your tenant(s) as people, rather than just a monthly rent check.

Pro No. 2: It's an entryway to real estate investing

If you're hoping to get into real estate investing on a larger scale, buying a property so you can rent out part of it can be a good entry point. You get hands-on experience with the local housing and rental markets, and a crash course on mortgages.

Pro No. 3: You can still qualify for financing

Speaking of mortgages, you can still get financing for a multi-family home if you're not intending to buy with cash. NextAdvisor notes that you may need a larger down payment (15%, versus as little as 3% for a single-family home) if you're wanting a conventional mortgage for a property that has four or fewer units (more than five is considered commercial real estate). If you're opting for an FHA loan instead, you'll be required to live in the property.

Cons of buying a multi-family home

There are drawbacks to be found here, too.

Con No. 1: Being a landlord comes with challenges

While I would argue that the negative impression that some people have of renters is largely undeserved, it seems as if everyone who owns a rental property has at least one "terrible tenant" story. If you're to succeed in this area, you'll need to take the time to screen tenants carefully, and hope you end up with one who pays rent on time and isn't disruptive or destructive.

Con No. 2: You will likely have higher maintenance costs

If you're saving money on the purchase of a big old two-family home, expect that your homeownership costs will likely be higher. You'll have more square feet to keep in good condition, and if the house has been a rental property in the past, it may have seen uneven repairs and maintenance over the years. It's likely that you'll want to live in as nice a home as possible, and your tenant(s) will also feel the same way, so if you're not willing to put the time and money into maintaining such a home, don't buy one.

Con No. 3: It may be harder to sell

Another possible con to buying a multi-family home is having to work harder or wait longer to be able to sell it. Not everyone has an interest in them, and so if you're expecting a quick turnaround on a future sale, you may be disappointed.

Buying and living in a multi-family house isn't for everyone, but depending on where you are, you may be able to get a deal on one. Consider your options and the pros and cons carefully to decide.