Should you buy a multi-family unit?

The American dream of home ownership is often stereotyped as buying your first little home with a yard and white picket fence. But as we all know, that’s not always the case. You can become a homeowner without buying a stereotypical single-family home in many different ways. In fact, looking outside single-family houses may be a smart way to become a homeowner faster!

Multi-family units like condos or apartments are becoming increasingly popular for prospective homebuyers. As the price of single-family homes has risen and inventory has remained low, multifamily unit construction has risen. In 2022, 1.7 million units were under construction, a record-high number. Currently, in the US, construction companies are building 50% more apartment and multifamily units than the pre-pandemic historical average, while the number of single-family homes is still 13% below the pre-pandemic average. These numbers show significant inventory available for first-time buyers interested in multi-family units. There are a lot of pros and cons to buying a multifamily unit as a first-time homebuyer. If you’re considering this option, let’s explore the pros/cons.

Pros:

• Lower prices: Multi-family units are usually much cheaper than single-family homes depending on the unit’s location and size. Most units are usually condos, apartments, or townhomes, so you typically wouldn’t own the land on which the property is situated, which helps reduce the cost as you may not have a yard or green space.
• Easier maintenance: Another benefit is that these properties have much easier maintenance issues. For example, suppose you own a condo. In that case, you may only be liable for certain maintenance issues like interior maintenance. Still, all exterior maintenance will be up to the building owners, such as snow clearing, landscaping, and exterior building maintenance.
• Communal living: If you enjoy getting to know your neighbors and making friends living in a multi-family unit may be a good choice. You’ll live closer to your neighbors and enjoy a more communal living experience. You may also have access to communal amenity spaces like a building gym, pool, outdoor space, or more!

Cons:

• Extra maintenance and association fees: One of the drawbacks of buying a multi-family unit is that you are typically responsible for condo or housing association fees. These fees go towards maintenance costs and building upkeep. They can be quite significant, and you wouldn’t be free to decide how your money is spent. Instead, your fees will be used at the discretion of the building owners or housing association.
• Less privacy: You’ll most likely share walls, hallways, and lobby space with your neighbors in a multi-family situation. While this type of situation can create a communal feeling, it can also lead to a lack of privacy or awkward situations if you have terrible neighbors.
• More volatile market: Multi-family unit prices and inventory are always increasing. But unlike the traditional housing market, multi-family units are much more susceptible to real estate price trends, and prices rise and fall quickly. This effect may mean that it’s harder to sell when you’re ready to move on.

The dream of buying your first home doesn’t have to look the same as it did for your parents. You can become a homeowner in many ways, and buying a multifamily unit may be the best for you now. So if you’re ready to start your homeownership journey, call your PRMI advisor, and we’ll help you pre-qualify to start looking for your perfect first home!