Have you been kicking yourself for not buying that perfect house way back when the mortgage rates were in the 3% range? I have some good news: Fannie Mae just made it possible to achieve those similarly low housing payments again!
Prior to November 18, 2023, conventional buyers of large New England single-family homes that have been divided to create an accessory apartment have needed at least a 15% down payment. (Conventional buyer refers to someone who isn’t using an FHA or VA mortgage.) This has excluded a lot of people from even considering purchasing these types of multi-family homes, but that 15% was just reduced to 5%.
Let’s walk through what that could mean for you financially.
Example Property
Take a look at 40 Pine St. in Woburn, which is currently listed on the market for $869,900.
If we hypothetically assume it sells for $950,000, the lowest down payment for a conventional mortgage would have been $142,500 under the old rules.
As of 11/20/23 however, a conventional buyer is now only required to invest 5%, or $47,500, in the same home. If we use a current mortgage interest rate of 7.5%, the principal and interest portion of their monthly bill comes out to about $6,310.
That’s a lot of money every month, but I promised you good news. Here’s the way a multi-family home can make your investment work for you. The median rent for a 2-bed / 1 bath apartment in Woburn from Dec 22 through Nov 23 was $2,325, which effectively makes the principal & interest payment for this new owner $3,985, rather than $6,310.
To put this into perspective, $3,985 is basically what the principal and interest portion of the monthly payment would have been for a $950,000 single-family home in Jan 2022 when mortgage rates were still around 3.4%.
Potential Additional Tax Benefits
As an added bonus for multifamily investors, the IRS will most likely expect the owner of a home that *feels* like a single-family but is technically considered a multifamily to write off a percentage of the mortgage interest, real estate tax, insurance, landscaping costs, not to mention about $9K per year simply due to “depreciation” of the rental portion. Not a bad deal for buying what used to be a large single-family home!
Intrigued?
Are you ready to put on a landlord hat to make homeownership a reality? Reach out any time; I’m always looking for an excuse to talk about the merits of owning multi-family homes, being a landlord, restoring older homes, and the financial benefits of multi-family investing. I live in a multi-family home in beautiful Wakefield MA, and I’m happy to speak from the perspective of a landlord, realtor, advisor for first-time home-buyers, carpenter/handyman, or whatever perspective you’re curious about. Let’s talk soon, and I’ll buy the coffee! 😁