Question:
“I want to start investing in real estate and I was talking with a real estate agent about buying 4 to 6 apartment units. She told me it’s better to buy 4 units, but when I asked her why, she didn’t really know. Do you?”
Answer:
I don’t know that it’s better to buy 4 units, but the financing is better.
Getting a loan for 1–4 units is easy (if you qualify). Most mortgage lenders do them at attractive interest rates. And qualifying is based on your credit, debts, and income. Of course, the property must appraise high enough too.
Getting a loan for 5+ units is harder and slower, and the rates and terms aren’t quite as good. Because the property’s rent and expense history influence the interest rate, you don’t know the exact rate until the lender reviews the property’s financials.
I once got a better loan on a 5-unit property I owned because my lender purposely ignored the 5th unit and treated it as a 4-unit property.
But back to my first point, I wouldn’t limit yourself to 4 units and below. All other things being equal, over the long run you’ll profit more with a bigger property.
If you’re interested in investing in real estate, call me at (858)457-KENT and we’ll find you a great property.
