01:00 AM EDT on Tuesday, July 5, 2005

BY MICHELLE R. SMITH
Associated Press

PROVIDENCE -- When Naama Gidron and her husband, Peter Wuhrl, decided to buy their first home in Providence last year, they started out by scouring the area for a single-family house.

They soon realized it would be a tough choice. The homes in their price range were away from the city amenities that attracted them to Providence in the first place.

"It just felt like there wasn't enough going on out there for me," Gidron said. "I like to be able to walk to a cafe."

Their solution was to become live-in landlords in a two-family house on the city's thriving East Side. Now they have two bedrooms, a small yard, a two-car garage and an attic space they can use as an office. The $1,000 rent they're paid every month for the unit downstairs helps pay their $2,400 mortgage payment, and they can walk to cafes and other shops just a few blocks away.

Gidron and Wuhrl aren't alone. Real estate agents say they're seeing more first-time home buyers purchasing two-, three- or four-family buildings as a way to get their foot in the door of home ownership. Realtor groups say there is no reliable way to track numbers of two- and three-family houses nationally, but in Massachusetts and Rhode Island, those numbers have more than doubled in the last decade.

"It's more bang for the buck," said Michael Young, president of the Rhode Island Association of Realtors. Young said multifamily homes have always been popular as investments, and in the 1950s and 1960s were thought of as a way for working-class families to become homeowners. These days, increased rents and skyrocketing real estate prices have led to a modern surge in multifamily sales, he said.

Nick Retsinas, director of the Joint Center for Housing Studies at Harvard University, which studies national housing trends, said that part of the interest is fueled by the increasing prices of single-family houses.

"When people look at that price appreciation, they're looking at other options," including condos and owner-occupied multifamily homes, Retsinas said.

The trend seems to be centered in the Northeast, around cities such as Boston and Providence that have an older housing stock made up in many areas by multifamily homes, real estate experts said.

In Rhode Island, for example, the median sales price of two- to four-family houses was $280,000 in the first quarter of this year, surpassing the $241,000 median price of single-family houses.

"That's a first," Young said. Multifamily houses had traditionally sold for less, since they were considered less desirable, but sales of multifamily houses more than doubled in Rhode Island to a record 2,478 in 2004 from 1,105 in 1994.

The median price rose 19 percent for the quarter from a year ago, compared with a rise of less than 3 percent for single-family houses, according to the Rhode Island Association of Realtors. The houses remain affordable because mortgage companies factor in rental income and will approve a larger mortgage with larger payments.

In Massachusetts, sales of two- to four-family homes more than doubled in a decade, from 4,747 in 1994 to 9,726 in 2004, according to the Massachusetts Association of Realtors. The median price of a multifamily house was $359,900 in the first quarter, compared with $346,800 for a single-family house.

The surge is driven in part by the rush to convert multifamily houses to condos, as well as the popularity of multifamily dwellings among first-time buyers and immigrants, Realtors said.

Abby and Mike Marschke bought a two-family house in the West End of Providence for $120,000 in May 2003. Abby, 29, an engineer, and Mike, 28, a graphic designer, knew they could afford a single-family house, but decided on a two-family because of the investment potential.

In late June, after spending $80,000 to renovate the property, they sold it for $289,000. They moved to a four-bedroom, three-bath single-family house in suburban Ashland, Mass. Although they made the move to be closer to their workplaces, Abby Marschke said they knew when they bought the house that their next step would be a single-family.

"Our plan was to build up home equity until we could move into a single-family," she said. "We knew that it was going to be a two-step process."

That kind of move is not unusual, Retsinas said.

"A lot of it is economics," he said. "It's part of a plan, as opposed to a destination."