Our latest post discusses how owner-occupied investment properties are aiding buyers nationwide in financing their deals. This approach can be an excellent method for beginning real estate investment, with relatively low upfront costs. To learn more about the advantages and disadvantages, read on!
Although not a novel technique, many novice investors overlook the potential of owner-occupied investment properties. While residing in a multi-family unit may not be your initial preference, the benefits can be substantial. In this article, we provide a list of pros and cons to consider when purchasing owner-occupied investment properties in Twin Cities.
Live For Free
Investing in a multi-family property and living in one of the units or buying a house and renting out the extra bedrooms to roommates can be a smart financial move. By doing so, you can leverage other people’s rent payments to pay off your mortgage, build equity, and potentially earn passive income. This strategy offers a unique opportunity to have your own residence while simultaneously owning an investment property.
One of the most significant advantages of this approach is the ability to generate monthly income while reducing your living expenses. Roommate rentals can help cover your mortgage, utilities, taxes, and insurance, freeing up your budget for other expenses or savings. This can be especially helpful for first-time homebuyers or investors who may not have a lot of extra cash to spare.
Furthermore, investing in a multi-family property or a house with extra bedrooms can help you save money over time. The extra income generated from renting can be used to build up an emergency fund or to prepare for your next investment opportunity. By building up your savings, you can reduce your financial stress and be better prepared to handle unexpected expenses.
However, there are some potential drawbacks to this strategy that you should consider. Living with roommates or tenants may not be for everyone, and it can be challenging to manage tenant relationships and property upkeep. Additionally, if you’re not careful, you may end up with vacancies or unreliable tenants, which could impact your rental income and ability to cover your expenses.
In conclusion, purchasing a multi-family property or a house with extra bedrooms and renting them out can be an excellent strategy for both homeownership and investment. It offers the potential for passive income, reduced living expenses, and savings for future opportunities. However, it’s crucial to weigh the pros and cons and to have a solid plan in place for managing the property and tenants.
Low Down Payment
You can use an FHA loan to finance the purchase a single-family home or a multi-family property with up to 4 units. Your credit doesn’t have to be perfect, nor do you need a large down payment. In most cases, you will only need 3.5% down. An FHA loan will require you to live on the home, but only for 12 months after the property closes.
Easier To Chase Down Rent
Hopefully, you will have high-quality tenants who always pay their rent on time. However, when you live on site, it will be much easier to chase down your rent if you need to. You’ll know when people are at home. You will be able to walk a few feet and knock on their front door. Or maybe you just have to yell down the hall if you’re in a single-family home.
You Are Easily Accessible
Living in a multi-family property or in a house with other roommates will have a severe impact on your level of privacy. This becomes even more on an issue when you are the landlord. You may get stuck with a tenant in another unit who knocks on your door at all hours of the night with complaints. You’ll likely find yourself having conversations struck up with you whenever you leave your apartment, which can grow a little tiresome.
You’ll Share Walls
It’s one thing to share walls with someone you may not have to deal with all the time. The occasional noise or loud TV won’t be such an issue. But if you are in close quarters, with people who are paying you to live there, the situations can become a bit tenser and involved. Or you may have a fight with a roommate, but find yourself unable to evict them due to your lease agreement.
Overall, the cons of purchasing owner-occupied investment property don’t compare to the potential benefits you can receive. You will only have to commit to living in the house for 12 months, which when you consider the perks, isn’t much time at all. When you find the right tenants or roommates, the situation can become even sweeter. If you like living there, you may not want to ever move out of the house!