For some people, purchasing an owner occupied rental is an incredible situation. You can turn the home you live in into an income producing asset!
However, just like with any investment, there are some cons to consider as well. If you are thinking about buying an owner occupied rental property in Chicago, read on to learn more about some of the pros and cons!
Pros and Cons Of An Owner Occupied Rental Property in Chicago
Have Other People Pay Your Mortgage
In essence, you will have other people paying your mortgage for you. To get an FHA loan on the property it can only have up to 4 units. However, if you have done your math ahead of time, the rent you charge for the other units should cover the mortgage on the property and then some. It is a way to own an investment property without really paying for it!
A Smoother Financing Process
Typically, you will have an easier time obtaining financing when purchasing an owner-occupied rental. Purchasing a single family rental, or larger building, with many more units will require specialized loans.
Because you live there, your tenants are more likely to take good care of the property. They are not going to leave a mess in the common space or cause damages to the property. In addition, they are less likely to have loud, late-night parties if you are in the vicinity. By fostering a more respectful environment, your tenants will be happier over-all. Living in a building with great neighbors is a perk for any renter.
You Can Manage On Your Own
Considering you will likely have 4 or fewer units, handling the property management side of things shouldn’t be too difficult. Hopefully, you will have great relationships with your tenants, so you can kindly and promptly be alerted to any problems. Collecting rent is easier… they can’t hide from you if they ever want to come home! Plus, physically being on-site makes all management much easier.
You Might Not Get Any Peace
Contacting you directly might become TOO convenient for some tenants. If you have a difficult tenant living in a unit they can end up bothering you day and night with their problems. Living offsite will give you a little space between you and your tenants. Overall, because of your role with the property, living in it may not allow you much privacy. Additionally, conflicts of interest can arise should you form a friendship with one tenant and not another. Make sure you set your boundaries and keep things all business with everyone who lives there.
They Might Not Want To Live By YOU
Whether you are renting or buying, you want the place you live to feel like it’s yours. People don’t want to feel like they are living under someone else’s roof. They do not want to feel as if they are being watched, monitored or as if they cannot relax in their own space. As a tenant in an owner occupied rental, your tenants might feel more like they are moving back in with mom and dad!
You Might Have A Hard Time Reselling
Statistically, investment properties and multi-family units take longer to sell then their single-family counterparts. There is simply more demand for single-family homes. If you are looking for something more temporary or with less commitment, you might consider a single-family home as opposed to a multi-family building.