It can be very exciting purchasing your first home. However, even for home buyers who are more prepared, the cost of a house can cause a lot of fear and trepidation. Making an investment into a multi-unit property that has a mother-in-law apartment or another type of rental can provide you with extra income that can help ease any financial anxieties you might have and help with covering your mortgage.
So be sure to take the time to look into all the benefits that are in making multi-unit property investments and consider whether you are prepared to accept all of the responsibility that comes with it.
Multi-Unit Property Benefits
As individuals continue living longer and as the costs of healthcare continue to increase, the demand continues to grow for multi-generational housing. According to the Wall Street Journal, more homeowners have the ability now to build these kinds of units on the properties they own and then rent them out thanks to lobbying efforts being made by groups such as the AARP. These efforts have helped to loosen some of the local regulations governing them. If you are wanting to buy your first house, capitalize on the efforts being made and start to reap the benefits from them.
Check out the local Craigslist ads in your area and you will see that there are dozens of individuals searching for mother-in-law apartments specifically. Renters like the homey feeling and privacy that an accessory dwelling offers compared to renting a room out within an apartment complex. This demand has helped savvy buyers be able to rely on having a steady income stream from their rental units. This money source is used by many homeowners as a way of paying their mortgages down or saving for retirement.
Excellent Resell Value
Since multi-unit residences are such a hot form of real estate, you most likely won’t have any problems reselling your property when you want to. The New York Times reports that 15 percent of home buyers are willing to pay extra for a home that comes with an accessory dwelling. Those potential buyers are searching for extra space for various reasons – a relative – especially among immigrant families where it is common to have multi-generational households- a tenant, or detached home office to be used for telecommuting jobs or freelancing.
Some of the rental revenues you earn will be taken up by taxes. However, you can receive additional tax benefits from rental properties. You can deduct such expenses from your taxes as travel, supplies, insurance, maintenance and repairs. For details on the best ways of deriving tax benefits from your rental properties, consult with a qualified tax professional.
Questions You Should Ask Yourself Before Purchasing
Before jumping into becoming a property manager, you need to take some important things into consideration first. The following are some critical questions you need to ask yourself prior to purchasing a house that has a rental unit with it.
Will you be able to afford the purchase’s time and price commitments?
As these properties increase in appeal and competitiveness, their price tag continues to increase also. Zillow reports that quite often fully permitted units are priced approximately 60 higher than are single dwelling houses. For re-sale value that’s great news. However, not necessarily when you are wanting to make a purchase. But due to the demand, most likely you will need to wait longer than you might expect to find a house with a rental unit to buy. If you are searching to quickly buy a house, one that comes with a rental unit might not be available within your time frame.
Are you prepared to become a property manager?
There is more to being a property manager then just collecting the rent check every month. In fact, it is a 24/7 job and responsibility. Your unit needs to be maintained to keep your renter happy with his living situation. Tenants, in fact, have basic rights that as a landlord you must guarantee. Check out what your state’s specific requirements are b consulting with HUD (U.S. Department of Housing and Urban Development).
Robert Griswold, who wrote “Property Management For Dummies,” you can expect to invest approximately 10 percent of the income you make from your rental and put back into your unit. Regular updates and occasional repairs will need to be made to the property, and you might alienate good tenants if regular maintenance work isn’t kept up on. Be sure you are prepared for handling the effort and time it takes for being a successful property manager prior to buying a house that has a rental unit with it.
Is it a legal rental?
Depending on what your city requirements and state rental laws are, sometimes an in-law apartment can’t be rented out legally due to the fact that it is violating zoning ordinances. You need to perform due diligence when searching to buy a house with a rental unit. Find out from the local building department about a certificate of occupancy. Also get in touch with your city’s zoning and planning office to determine what its local zoning requirements are.
Although municipality enforcement is frequently lax, you might need to have a business license in order to rent out your unit. Apartment Management Magazine reports that not being in proper compliance can potentially affect everything ranging from insurance to being able to evict tenants.
Is municipality code met?
Even if the zoning regulations allow you to rent the unit out, you might have your eye on a rental unit that doesn’t met the rental housing codes of your municipality. These rules can be found through the code enforcement officer of your city. Check with your city’s planning office to ensure that the property building permits have been filed prior to purchasing, since it can be quite expensive trying to reconcile code violations once you have already purchased the property.
Hire an inspector to help you examine the rental and discover any problems prior to buying. Before buying the house, you can ask that these problems be fixed by the seller.
It can be very exciting to own a first house. Although the expenses associated with home ownership can appear to be daunting at first, purchasing a house that comes with a rental unit can help to free yourself of some of the stress. Just be sure you are fully prepared to take on all the property manager duties you will be responsible for.