Purchasing your first home is a significant milestone in your life. It’s an investment that can be both exciting and nerve-wracking. Many people often consider purchasing a single-family home as their first property, but have you ever thought about investing in a multi-unit property instead? Recently, Ed Grochowiak, our team lead at Groho Group @properties purchased his first home, a multi-unit property in the Logan Square neighborhood of Chicago. Here are a few reasons why your first home should be a multi-unit property.
One of the most significant benefits of purchasing a multi-unit property is the potential for rental income. With a multi-unit property, you have the option to live in one unit and rent out the other units. This rental income can help offset the cost of your mortgage, making it easier to afford your home. Sometimes an owner occupier can even live for free depending on the area of Chicago.
2. Build Equity Faster
Investing in a multi-unit property can help you build equity faster than a single-family home. Since you have the option to rent out the other units, you can use that income to pay down your mortgage faster, which can help you build equity in your property at a faster rate. Some months when cash reserves allow, you can make an additional mortgage payment to pay down your principal and gain even more equity.
Diversify Your Portfolio
Owning a multi-unit property can also help diversify your investment portfolio. By owning a multi-unit property, you are not relying on just one tenant for rental income. If one tenant moves out, you still have other tenants to help cover the cost of your mortgage. When Ed purchased his 3-flat, there were no tenants in the building. This allowed him to paint and do minor updates to bring the building up to speed for the next renters. A couple months down the line, he will have recouped his investment with the rental income of those 2 units.
Lower Maintenance Costs
Multi-unit properties typically have lower maintenance costs than single-family homes. Since you have multiple units in one building, the cost of maintaining the property is spread out among multiple tenants. This can help save you money in the long run and make it easier to maintain your property. Ed decided to do the most improvements on the 1st & 2nd floor units as they would net larger monthly rents. He opted to live in the garden unit and delayed any updates to his unit, until the other two units were rented out.
Potential for Appreciation
Multi-unit properties also have the potential for appreciation, just like single-family homes. As the value of the property increases, so does the value of your investment. This appreciation can help you build wealth over time and provide you with more options for investing in the future. Chicago is no exception to the appreciation that multi-unit properties are experiencing across the country.
Purchasing a multi-unit property as your first home can provide you with several benefits, including rental income, faster equity building, portfolio diversification, lower maintenance costs, and potential for appreciation. Before making a decision, it’s important to do your research and speak with a real estate professional to determine if a multi-unit property is right for you. Ed learned so much throughout the process and is looking forward to the next one!