Homeownership can be a financial game-changer, especially for servicemembers who often find themselves relocating or deploying. If you’re looking for a smart way to make your housing dollars work harder, buying a multifamily property — like a duplex, triplex, or fourplex — could be the perfect move. 

Multifamily properties offer a unique blend of benefits. For starters, you can live in one unit while renting out the others, a strategy known as "house hacking,” which means your tenants are helping you pay your mortgage. How much you’ll earn from this arrangement varies widely by including location, mortgage terms, rent prices, and operating costs. The general industry benchmark for the return on investment for purchasing a duplex is 5% - 15%. 

Here’s how to calculate ROI for a multifamily property:

1. Determine annual rental income: For example, if you rent one unit for $1,500/month, that’s $18,000/year.
2. Calculate your annual expenses: This should include your mortgage and any fees (principal, interest, taxes, and insurance), maintenance and repairs, utilities (if you will be paying them); and property management fees (if any).
3. Calculate net income: The net income is the rental income minus your expenses.
4. Calculate ROI and total investment
   • ROI = (Net Income/Total Investment) × 100
   • Total Investment = Down Payment + Closing Costs + any Renovation Costs

Sample ROI calculation:

• Purchase price: $300,000
• Down payment: $60,000
• Closing costs and renovations: $10,000
• Annual rental income: $18,000
• Annual expenses: $12,000 (mortgage, maintenance, etc.)
• Net income: $18,000 - $12,000 = $6,000
• Total investment: $60,000 + $10,000 = $70,000
• ROI: ($6,000/$70,000) × 100 = 8.57%

Even better, if you’re eligible for a VA Home Loan, you can use it to buy a multifamily property with up to four units, as long as you live in one. Lenders may count a portion of the expected rental income from the other units towards your income, improving your debt-to-income (DTI) ratio and helping you qualify for more favorable loan terms.

In addition to the passive income, you may enjoy some nice tax perks, like deductions for mortgage interest and property depreciation on the rental units, and as you build equity, you can use it to buy more properties. Be sure to check with your tax advisor regarding deductibility and impact on your taxes. And here's the best part: When duty calls and you’re deployed, your multifamily home may keep earning you income instead of sitting empty. 

Making Sense of the Multi

Using a VA Home Loan for a multifamily property is one of the best ways for servicemembers to build wealth through real estate while keeping housing costs low.

First, you’ll want to figure out your budget. Take a close look at your finances and see how much you can comfortably afford. If you’re using a VA Home Loan, talk to a VA-approved lender such as AAFMAA Mortgage Services LLC (AMS) to get a sense of your borrowing power, or use our VA Home Loan calculator to estimate your monthly mortgage payments.

Next, think about location. You’ll want to prioritize properties in areas with strong rental demand, ideally near a military base for convenience. Once you have your sights set on a property, it’s a good idea to work with a real estate agent who has experience in multifamily properties and working with servicemembers to guide you through the process. 

You’ll work with your agent to prepare an offer. It’s a good idea to include a contingency, which allows you to back out if the VA appraisal comes in lower than expected. Your agent can also help you negotiate seller concessions (the VA allows the seller to pay some of your closing costs).

Multifamily homes are more complex than single-family ones, so you’ll want to make sure everything is in good shape before you buy. Pre-purchase home inspections are a must, and the property must meet VA Minimum Property Requirements (MPRs), including safety, structural soundness, and habitability.

Related: Preparing for the Make-or-Break-It Home Inspections

Renting Part of Your Home

If you’re ready to start renting, you’ll want to find out what similar properties are renting for in your area. Make sure the rental unit is clean, safe, and fully functional. If you can, separate the utilities for easier management and screen your prospective tenants carefully, including background and credit checks. 

Having a solid lease agreement is key. This protects you and your tenants by clearly outlining rent terms, due dates, and responsibilities. Once you have good tenants, make things easy with online rent collection. 

If you get deployed, you have options. You can hire a property management company to handle tenant concerns, or you can ask a trusted friend or family member to help. Be sure to have landlord insurance for extra protection.

Renting Your Primary Residence While Deployed

Already own a home and heading out on deployment? You don’t have to leave it empty. Renting it out can keep cash coming in and prevent your place from becoming a target for squatters.

Let your lender and insurance company know you’ll be renting your home out (your insurance may need to switch to landlord coverage). Set a fair rental rate by checking local prices and make sure to screen tenants thoroughly. Even if you’re in a hurry, don’t skip this step. Before you leave, have a plan for property management. A trusted friend, family member, or a property management company can be a big help. Leave clear instructions on how to reach you for emergencies.

We’re Here to Help

Whether you’re thinking about buying, ready to start home-shopping in earnest, or considering a refinance, an AAFMAA Mortgage Services LLC (AMS) Military Mortgage Advisor, a licensed mortgage loan originator, will be happy to provide you with an honest and fair comparison of your mortgage options, including a wide range of affordable mortgages designed to meet your needs.

Ensuring Armed Forces Mutual Members obtain the best mortgage possible is our mission. Get your free mortgage assessment today or give us a call at 844-422-3622!