A multifamily residential property contains separate dwelling units for more than one household. The property has shared walls, floors, or ceilings but individual entries. It can include duplexes, triplexes, quads, apartments, condos, townhouses, and other attached housing. Multifamily housing can also include mixed-use developments, where the lower floors have retail, office, or commercial tenants and the higher levels contain housing units.
By definition, multifamily housing with more than four units is considered commercial real estate—the distinction matters for financing, cost, and overall investment strategy. On the other hand, a property with one to four units is deemed residential, and you may be able to obtain more favorable financing terms if you live in one of the units.
Suppose you buy a four-unit property and plan to live in one unit and rent out the remaining three units. There are some potential benefits to this arrangement:
A qualified service member or veteran may be eligible for a mortgage loan backed by the U.S. Department of Veteran's Affairs. Eligibility depends on several factors, including length and type of service. In general, these are the defining criteria:
For those who qualify, the VA loan has no down payment requirement, no mortgage insurance, and limited closing costs. Interest rates may be lower since the loans are less risky for the lender, and borrowers may have an easier time qualifying in some circumstances.
Eligible borrowers can use a VA loan to purchase a property with up to four units if they plan to live in one unit. Keep in mind that if you buy a home using your VA benefit and have to move, you can only have one VA mortgage at a time (and there may be less advantage for future utilization in some situations). Talking to a lender that participates in issuing VA mortgage loans is a great first step before deciding when to use the benefit.