Favoring 2-4 Units (financing)

I’ve touched on this before, but another compelling reason why 2-4 units can be more desirable is because of the types of loans you can get.

We’ve discussed the down payment before:

– 25% for 2-4 units (20% if you’re an owner-occupier) vs. 30% for 5 or more units.

But in this market, with interest rates so low, you want a 30-year fixed loan whenever possible. If you have 5 units or more, you can’t get more than 5-10 years guaranteed, and your interest rate might even be half a point higher.

This is why we call 5 units the no-man’s land for income property financing. ¬†Unless you’re buying with cash (and hope to sell for cash), you’re better off going bigger or smaller.

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