Re: three, six, or twelve?

Re: three, six, or twelve?
Re: three, six, or twelve? -- jer	Post Reply	Top of Thread	Forum

Posted by: mike.g
01/29/2006, 18:16:51

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Hi Jer, you have posed an interesting question. i have owned or own currently buildings that you describe.
i can give you a couple of observations and benefits of each.
6 plexes and smaller units can be financed through more banks and some banks will give you a residential mortage to purchase this type of property. this will generally get you a lower interest rate. you will need to finance this type of property conventionally with 25% down. these small buildings are easier to sell. first time investors assume that the risk is smaller with less units. the municipal taxes are lower for buildings 6 units and smaller. you pay residential rates compared to commercial rates. you are paying higher heating costs because you need to heat more properties compared to 12 units under one roof. the common area is smaller in 6 unit buildings. this is easier to clean and it keeps the tenants away from each other(this is a good thing). if your buildings are not next to each other it can be a pain keeping an eye on the properties.
Larger units (7 units to whatever you can afford) offer different oppurtunities. the purchase of these type of buildings can be a little harder to finance. the costs of the financing arrangements are higher. the purchase price per unit is usually lower. i pay less per unit when the building requires a commercial mortage. purchasing larger properties the commercial mortage can be assumed. larger properties the seller can be motivated to hold some of the mortage. this could help lower the amount of your down payment. the actual cost of running the building can be lower. you have one heating bill, one parking lot to plow, one grass to cut and one insurance premium.
i don't think i have answered if small buildings are better than large buildings. i tend to like either. i like the best deal on the purchase side. to me the deal is more important than the size. the deal that gets me the building for the least amount of money down per unit is what i like.
mike

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Re: three, six, or twelve?	jer	01/30/2006, 22:00:15 730 bytes +1
Re: three, six, or twelve?	mike.g	01/31/2006, 15:55:47 605 bytes +1
Re: three, six, or twelve?	jer	01/31/2006, 19:18:19 513 bytes +1
Re: three, six, or twelve?	mike.g	02/01/2006, 20:01:25 1487 bytes +1
Re: three, six, or twelve?	jer	02/02/2006, 21:02:45 745 bytes link