Why Owner Occupied Properties Are Great Starter Investments
Owner occupied properties are rental dwellings where the property owner lives in one of the units. They are usually smaller buildings, three or four units maximum, and there are many benefits to purchasing this type of property and living there. This is why this type of investment is good for those beginning to add real estate to their portfolio.
Less Upfront Costs
The dreaded down payment is every property buyer’s worst nightmare, and if one is looking into purchasing rental property, the initial percentage to secure the deal can be upward of 20 to 25 percent. The benefit of purchasing owner occupied properties is that because the property owner lives there too, the down payment is more in line with traditional home loans and can be much lower.
Less Management Costs
Alongside having a lower down payment to purchase the property in the first place, if the owner is living on the premises, he or she will not have farm out property management and maintenance fees. Hiring a property manager can cost an owner five to 10 percent of each renter’s monthly payment and maintenance companies can cut into the bottom line even more. When living onsite, the owner can take care of all necessary issues him or herself, or at the very least save money by hiring someone directly.
No guarantee, but chances are if the owner lives in the small building, people are more likely to respect the property and behave. Large apartment complexes gives people the opportunity to go crazy if they live far away from the management office and after management goes home. Owner occupied properties mean the owner is onsite at all times, so the tenants are more inclined to be good ones.
Tax Write Offs
When a building owner lives in the building alongside his or her tenants, he or she can write off the expenses incurred to rent the property against the rent collected. The property owner can also write off the building’s depreciation, meaning he or she deducts a portion of the property’s value annually to compensate for the building losing value as it ages.
Owner occupied properties are a fantastic way to get started in real estate investing. Not only can the person interested in purchasing the property come in at a much lower down payment than traditional investment property, he or she can also live in a unit to enjoy the additional financial benefits. Once he or she is ready to move on, the owner occupied unit becomes a rental unit as well, and additional income is earned.