California - Legal Diff's Between Single-Fam & Multi-Unit Properties?
Hey, y'all!
I'm out in Los Angeles, looking to buy my first house (hopefully of many...though I'm currently renting. Gotta start somewhere, right?). Eventually, the goal is to own multiple properties with positive cash flows, etc, blah. The usual buy-and-hold investor-plan, with a few of my own spices added in for fun.
There's a problem: Given the current heated market in Los Angeles real estate, I'm having problems finding a single-family home I can afford. Even at these low interest rates, and adding in a roommate or two to help cover costs, the only places I can afford to buy are REALLY undesireable. nce we get up to multi-unit properties, however, prices look a little more do-able, given the opportunity to have tenants, and provided I can get the mortgage or owner-financing.
Here's the deal: Through some direct mailings, I've found a couple of multi-unit properties whose owners want to sell, not going through a realtor. One is a four-plex, and the other has five units (err...quinta-plex? Maybe? 
). Both are good deals, given current market conditions & comparable property prices...but only the five-plex has the potential to have positive cash flow right now, from the get-go. Especially if I can get owner financing...which may be a possibility, but only for the five-plex.
I've heard that once you get over four units, however, a lot of things become different. But I can't remember, right off-hand, if those differences are strictly relating to mortgage/financing, or if they also concern property taxes, insurance, etc.
Can anyone tell me what I might need to be concerned about, going into a five-plex (or a four-plex, for that matter), that's different from going into a single family home, or a SFM with a guest house? Is there anything that's specific to the Los Angeles area, but not elsewhere? All the units in the aforementioned properties are currently occupied on month-to-month leases, with a good upside on rents, and I intend to move into one of the units myself once escrow closes.
Anything you can tell me would be greatly appreciated.
Thanks much!
Kipp
1-4 units you can get a residential loan w/ better ltv and rates, 100% cltv financing w/ seller second. 5+ is considered commercial and you would have to put down some of your own money even w/ seller second. Most lender will not allow 100% cltv. Also keep in mind that most lenders will not use the tenant rents as income to qualify you unless their lease agreement is 1yr+.
Thanks, JM!
Looks like it's on to figuring out the best way to talk someone into seller financing...
Regards,
Kipp