Investing in real estate can be a smart move, but that doesn’t mean this wealth-building strategy is attainable or right for everyone. You usually need at least 20% to put down on an investment property and saving that much money can be a tough task for almost anyone – especially here in Los Angeles.
But, what if you could buy an investment property that brings in cash every month and live there yourself? Believe it or not, this strategy — buying a multi-unit building (2-4 units) and using it as your primary residence — is one many new homeowners and investors have used for decades to get their foot in the door.
There are numerous benefits that come with buying a duplex (or any multi-unit property) and living in one of the units, but there are drawbacks, too. Before you decide to buy a multi-unit property like a duplex, triplex, or quadruplex experts say you should explore both the pros and the cons.
The benefits of buying a duplex, triplex, or quadruplex
If you’re eager to become a homeowner but also want to invest in real estate for the long haul, buying a 2-4 unit building to live in can help you kill two birds with one stone. Not only will you secure a roof over your own head, but you’ll have at least one other unit you can rent out for profit or to offset the monthly mortgage payment. Depending on your goals, you could use the rental income to either a) reduce your own cost of living or b) snowball into more real estate investments down the line. You could even do both.
One reason buying a multi-unit building is such an appealing idea is that there’s a lower barrier to entry than if you were buying a free-standing rental property. We already mentioned how you typically need at least 20% to put down on a single-family investment property, but the rules are a lot different if you’re buying a property to live in yourself.
Using a loan from the Federal Housing Administration (FHA), for example, you may be able to buy a duplex, triplex, or quadruplex with just 3.5% down. FHA loans also come with less strict credit requirements and low closing costs, which can make them even more appealing.
In addition to being able to put down less than 20%, here are some additional benefits to buying a property to live in while renting out the other units.
You can use the rental income to begin pursing financial freedom.
Buying a 2-4 unit building is a greaty way to set yourself up for financial success. Why? Because you can use the rental income you collect to free up more cash for yourself. By collecting rental income from the other units you have the ability to potentially nullify your mortgage payment and live at a very low cost.
You may be able to afford a nicer place for yourself.
Another benefit of buying a 2-4 unit building is the fact you can usually count a portion of your future rental income in addition to your own income to qualify for a mortgage. This increases your borrowing potential. This could result in you being able to afford a duplex that is in better shape or in a better area.
Being a landlord is technically a business, which means you will be able to write off certain expenses like repairs to the rental units. When you live on site, you can also typically deduct a portion of common area maintenance that impacts both the rental unit and yours, like landscaping.
Buying these properties can have lots of benefits. It's also important to note that living in the property doesn't have to be a forever situation (FHA says you must occupy the property for one year). You can use this strategy to get started as a real estate investor without saving huge amounts of cash (see our owner-user marketplace).
We believe in this strategy so much that we have built a whole website dedicated to it! For those of you who are interested in this strategy please reach out to to get started with the process. Contact us via live chat in the bottom right of the screen or..
Email - Pro@PadMint.com
Phone - (310) 957 - 3317