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Owner Occupant Investors: Multi-family opportunities

When it comes time to purchase a home, most homebuyers fail to consider the path of purchasing a multi-family. Whether this is due to the belief  that they can’t afford it, that they can’t compete with seasoned investors, or something else altogether, most people don’t give the matter much thought. By doing so, they are missing out on a unique and profitable opportunity.  With current FHA 203k lending standards and recent changes in rules for Fannie Mae foreclosure sales, the time for owner-occupants to get into real estate investment has never been better.

Friendly Sales Rules

Under new Fannie Mae rules, any foreclosure that hits the market from Fannie’s books will be held for owner-occupant bids only for the first 15 days of the listing. That means owner-occupants have exclusive reign over these properties for over two weeks. While professional investors have found this change frustrating, there is no doubt that it has opened up a new market for first-time investors. Since most investors cannot purchase these properties during the initial period of the listing, as an owner-occupant you can cherry-pick the property of your choice without having to fight off investors with their deep pockets. With careful purchasing, it is not unheard of to find a duplex or 4-family that will actually cash flow even when the owner occupies one of the units. So not only can you live for free, you can pocket money each money.

Friendly Lending Rules

For most investors, securing financing for any fix-up work at a property has become tantamount to impossible. If they don’t have cash, or a great relationship with their banker, there is simply no way to pay for repairs. And in the world of foreclosures, its rare to find a property that doesn’t need at least some work. For an owner-occupant, the situation is different though. Through the FHA 203k program, owner-occupants can not only finance the purchase price of their home, they can finance the repairs as well. With downpayments as low as 3.5% no less. While most lenders will only offer this for single-families, there are some that are able to offer this program for multi-families up to 4 units.

Income potential

The single greatest reason many people looking for a home dismiss purchasing a multi-family is that they simply don’t want to have to deal with sharing their home with someone else. However, a little bit pain today can help you reach financial independence far more quickly than saving your pennies from your day-job while paying a big mortgage payment. By owner-occupying a multi-family building, someone else will be paying most if not all of your mortgage payment. The money saved can then be put towards paying down the mortgage principal, purchasing other properties or whatever you want. The point is that it frees up capital so that you can live your life the way you want to.

Additionally, under 203k, after you have lived in a property for a year or more, you can move out. Should you choose to move on to a house or another multi-family at that point, you can then rent out the newly vacated unit. This would allow you to increase your revenue stream even further. Purchasing one of these properties as your home can be a relatively short-term venture. There is no need to tie yourself down for years if you don’t want to. With current interest rates and building prices so low, the cash flow potential is tremendous. You might have to sacrifice a little bit of space and privacy for a while, but the long term benefits to your financial future are well worth it.

Check out part 2 in the Owner Occupant Investor series for more on FHA 203k financing.


Matt Kastner

Matt Kastner is an Investment Real Estate Consultant at St. Louis Real Estate Society in St. Louis, Missouri. He is also develops properties on the side through Threshold Properties. When he isn't representing investors in the purchase or sale of multifamily properties, rehabs, foreclosures and other income producing properties, he is often taking on rehab projects himself. He lives in South St. Louis and has been in the real estate business since 2004.

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One thought on “Owner Occupant Investors: Multi-family opportunities”

  • Ways You Can Use the 203k to Invest Right Now!

    February 28, 2011 at 9:59 am

    […] Check out part 1 in the Owner Occupant Investor series for more on the benefits of owner-occupying a multi-family property. […]


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