Need to Know: Financing a Duplex

Hey All, Carter here with Crowley Real Estate and Century 21, and today we’re going to be talking about what you need to know when you’re looking at financing a duplex or financing a small multifamily purchase. So first things first, it really depends on if you’re planning to owner occupy the duplex, or if you’re buying the duplex as an investment property. If you can answer that question for yourself, then things will go a lot easier. I can dive into why the typical % down is for owner occupied & income property duplexes.

Financing a Duplex That You Are Owner Occupying

If you are planning on owner occupying the duplex, you do have multiple different financing strategies. Typically, the easiest strategy that you can use is an FHA loan. Only 3.5% down on the purchase, of course you need to follow FHA guidelines. But only 3.5% down, and you can request the seller to pay your closing costs so you won’t have to come out of pocket that much when buying. An added bonus when buying an owner occupied duplex is that you can use your tenant’s rent so you can purchase a little bit more expensive property. Lenders factor in the rental income as personal income so you can afford more property.

With an FHA loan, you do have to owner occupy it for at least a year time period. There’s other conventional loan products that require the same occupancy period but those are at 5% down, or 10% down. You might be thinking, “well why would I put more money down if I don’t need to?”, and the answer is that with a normal conventional loan you do not have the government regulations like an FHA loan has.

What Are the Lending Terms for an Owner Occupied Duplex

It’s great to purchase a duplex to owner occupy, because the financing terms are typically a 30 year note. In the commercial lending space this is unheard & never done. But a conventional note is a 30 year amortization & timeline. As far as interest rates go you will be right around 4.5 to 5% which again is extremely low & cheap.

It’s a win-win strategy all around if you’re looking to owner occupy a duplex. You can live in a property you own fvor very little $ per month. And to actually start the financing process all you have to do is speak with a local mortgage lender & they can help you get started.

If you need a referral to a local lender click here…

Financing a Duplex for Income Property

Now, if you’re buying duplexes to use as income property in the Appleton area, what are your different options for financing? First things first, you will need at least a minimum of 20% down. So, on a $100,000 purchase, that is $20,000 down to purchase that a rental property. The 20% down loans are standard with all income property, unless using creative financing techniques. It depends upon your mortgage lender or your banking institution on what they require down. Some are at 20%, some are at 25%. Interest rates will also fluctuate depending upon if you’re going to own it an LLC (commercial loan), or your personal name (conventional loan).

In most commercial loans it is an adjustable rate mortgage, which means it’s fixed for five years or 10 years, and then after that the rates starts adjusting, or the balloon payment is due. Commercial lenders have less strict guidelines so sometimes it is worth the higher interest rate/ARM mortgage to get the property purchased & then later refinance it.

Referral for a Commercial Lender Click Here…

In Conclusion to Financing a Duplex…

These are things that you should explore prior to buying a duplex in the Appleton WI area. If you need a referral for any sort of lending services or a mortgage lender, just please reach out to me. Fill the form down below or if you’re interested in having someone help you buy an income property here in the Appleton or surrounding areas, please reach out. Like I said, fill out the form down below, and I’d be more than happy to assist you. I appreciate you guys watching. I hope you found the information valuable, and I hope you have a great rest of your day.