It is also referred to as a “three unit” and “triple.” Technically, it falls under the same category as a multifamily unit or even an apartment building.
3 Benefits of Owning a Triplex
With so many different property types out there to choose from, it might be difficult to decide which kind to add to your portfolio next.
With roughly 35% of this country’s population currently renting, the most obvious benefit of purchasing a triplex is that you can take greater advantage of this current boom of renters than you could with just a single unit.
The reason so many investors are rushing to secure triplex financing is because they know it means enjoying the three following advantages.
1. You Enjoy 3 Streams of Income with Just 1 Mortgage
No matter what kind of triplex financing you opt for, you’ll only need a single mortgage to essentially buy three new sources of income.
Among other things, this is great for protecting your portfolio’s cash flow. When you own a single-family property, vacancy is a constant risk you need to defend against at all costs. Otherwise, it will end up costing you when you’re making mortgage payments without receiving monthly rent checks from tenants.
So, if your monthly costs for a triplex (mortgage payment, taxes, etc.) are $1,200 and you’re able to charge each of your three tenants $800 in monthly rent, losing one of them won’t produce a negative cash flow. Your profit margin will take a hit, but you’ll still be in the black.
2. You Can Live in One of Your Units and Still Enjoy a Positive Cashflow
Many people who purchase duplexes opt to live in one of the units and rent out the other. Generally, this means charging the tenant enough that their rent covers your monthly payments. So, effectively, you get to live “rent-free.”
This concept also applies to owning a triplex, except it’s significantly better. Not only is your rent being paid, but you’re able to enjoy a decent profit, as well. Once again, even if one of your tenants leaves, you’re not stuck with a negative cashflow. Maybe you have to put up with breakeven months until a replacement can be found for the empty unit, but that’s not as bad as running a deficit.
3. Someone Else Is Paying for Your Next Down Payment
Finally, having two to three tenants won’t just provide you with a healthy profit, month-after-month. It will also mean they’re helping you build equity, all without you needing to spend a dime.
Eventually, you can then put that equity toward a cash-out refinancing, which would secure the funds necessary to lock in another mortgage, and purchase yet another rental property.
Why Traditional Lenders Are Often Poor Sources of Triplex Financing
Despite the many benefits of owning a three-unit property, most traditional lenders shy away from offering triplex financing.
For one thing, Fannie Mae’s guidelines regarding “multiple financed properties for the same borrower” essentially limit an investor to 10 mortgages. That might work for some people, but many investors have ambitions of growing their portfolios to several times that.
Furthermore, even if you’d be perfectly happy with 10 or fewer properties, the requirements for triplex financing are still very limiting.
You could apply for FHA or VA loans, but they also come with some strings attached. As those are forms of government-backed lending, they’re only for owner-occupants. So, you’ll have to live in one of your units to be eligible.
Nontraditional Lenders Are Your Best Source for Triplex Financing
It’s because of the aforementioned limitations that real estate investors who want to own more than 10 properties turn elsewhere for their triplex financing. Many seek out nontraditional lenders long before hitting the 10-property mark simply because of the many advantages their lending process offers.
First, as asset-based lenders, these institutions don’t care about:
- Employment status
- Taxes (no W-2s or 4506-Ts required)
- Current number of mortgages
As long as the triplex in question is able to produce sufficient income to pay back the loan, you’ll be considered for a mortgage.
Second, there’s no limit to how many mortgages you can own. Not only does that mean you won’t be turned away for owning too many, it also means you can apply for blanket loans that can cover multiple properties with just one mortgage.
Third, because they have far less red tape to contend with, nontraditional lenders can almost always provide you with the money you need faster than a bank could. This can make all the difference when a new opportunity presents itself and you need triplex financing right away.
We Have Your Triplex-Financing Needs Handled
If you’re currently aware of such an opportunity, we’d love to help.
At Rental Home Financing, we’ve spent the last five years helping investors just like you access the kind of financing they need – often triplex financing – to build the impressive portfolios they wanted.
This has amounted to nearly $500,000,000.
We offer no shortage of financing services and a great deal of flexibility, too. These include options for purchasing, refinancing, and cash-out financing.
After passing our property-based debt-to-income (DTI) assessment, we can finance up to 1,000 properties at once. We can even finish the entire process within two-to-four weeks.
So if there’s a triplex out there that catches your eye – or more than one – contact us right away and let’s talk about the type of triplex financing that would suit your best.