Owner Occupied Rentals prevailing wisdom?

4 Replies

Hello,

Anyone here own and live in a duplex/triplex/quadruplex?

Looking for the prevailing wisdom on doing something like this and how much it skews the 50% rule kinds of guidelines. Any blog posts, podcasts, etc? Just listened to BP #99 and they touch on it briefly, but didn't know if anyone had a specific focus in this area. 

Thanks!

Hi again @Dan Sanders ! So far, I have lived in my properties which came in handy when I sold my first rental house and had to pay no capital gains tax. I lived in my duplex for a short time and obviously my personal home. I think @Brandon Turner refers to it as house hacking. Its a good way to get a lower interest rate/down payment loan and also save money on living expenses. I'm actually selling my personal home so that I can get into another multifamily and achieve just that. Legally, you have to live on the property for 1 year to qualify for an owner occupied loan. Otherwise I believe its technically fraud, although I know a few who have never actually lived in the building and gotten away with it (not suggesting that).

I don't know what everyone else does as far as running the numbers, but I simply run them as if I would be renting the whole property since I would only be living there for a short time. If it works out as an investment, then I'll just accept whatever cash flow or reduced living expenses I get while I live there. The important part for me is that its still a cash flowing investment when I move on to the next one.

Originally posted by @Dan Sanders :

Hello,

Anyone here own and live in a duplex/triplex/quadruplex?

Looking for the prevailing wisdom on doing something like this and how much it skews the 50% rule kinds of guidelines. Any blog posts, podcasts, etc? Just listened to BP #99 and they touch on it briefly, but didn't know if anyone had a specific focus in this area. 

Thanks!

Yes, I live in my quad, can't recommend it enough. Great way to buy a larger asset than you can purchase on your own and only put 3.5% or 5% down. If I move out but don't sell it'll cash flow pretty well, if I were to sell I'll pay no capital gains taxes (as long as you occupy it for 2 out of the last 5 years). Right now I'm living for free while my tenants buy me a house (not to sound crass, just to emphasize a point). 

It's been nothing but positive and my wife and I have built a nice little community with our tenants. We feed/watch each others pets, share an occasional meal, have gone to a few local events together, etc. Nothing too crazy but its certainly nice. The key is good screening and renting to people that you think you won't hate...

I'm very customer service oriented so when they have an issue, I'm on it immediately, and I think they appreciate that. I certainly appreciate them paying the rent early/on time every month so I like to keep them happy. 

I'm not naive enough to think it's all peaches and cream and always will be but, with good screening and common sense, it's been a great experience. 

I lived in my first rental. One of the best i had i think it is due to seeing me all the time and they know that i would knock on their door if i was late. 

I suggest it to most people starting out. There are very favorable loans and tax benefits. 

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