What if there was a way to not only purchase a home to live in, but one that can help make you a bit of money, too? There is, and it’s been a growing trend in real estate the past several years. The way to do it is to buy a multi-family home, such as a duplex, live in one side and rent out the other. On paper, making this sort of purchase can sound like a fantastic idea. Renting out a portion of the home will make the overall mortgage payments lower, thus allowing you to pay off your house faster, or at the very least save some cash while you live there. Then, if you ever decide to move, you can just rent out the portion in which you live and everyone is happy. Right?
Here are a few things to consider before you purchase a multi-family home:
- Taxes are much more complex for owners of multi-family homes. Because it’s 1-part home, 1-part investment, your taxes are going to be very different than if you purchased a single-family home. Always consult a tax professional before making a purchase like this.
- Make sure it’s a legitimate multi-family home. Just because a home has an attached apartment or other living space doesn’t make it a multi-family home. A lot of times, a person will build an addition onto their house to produce income. Unfortunately, many of those people will not get the addition permitted, and if you buy that home, you now have an apartment that you cannot rent.
- Proximity to your renters can be a double-edged sword. On the one hand, you’ll be right next door, and if your renters are trashing the place, you’ll likely find out quickly. On the other hand, you’ll be right next door, and if your renters are loud or obnoxious, you’re the one who has to deal with it. Additionally, if you have needy neighbors, they can easily find you.
Buying a multi-family home can be an excellent investment vehicle. If this is something you’re looking to do, make sure you do your due diligence beforehand in order to avoid some of the potential pitfalls like those listed above.