It is not the most ideal situation for many people – but for some – especially those looking to “own” their own home, buying a duplex or multi-family dwelling, can be a good idea.
I've done it - and know several people who are or have bought a du/triplex then lived in one unit – rented out the others - and not only did it work for them financially, but it got them into a home that they might not have otherwise been able to do.
Some pros about owner occupied investments:
Easier financing – there are many more owner carrybacks, or other traditional financing options available for owner living on site properties because it is considered a primary residence.
Personal monthly costs can often be subsidized by the rental income.
Insurance costs may be less because it’s considered a primary residence.
You can select your own tenants and you may be more selective (in Arizona) if you live in a plex that has 4 units or less.
Some cons of owner-occupied investment properties:
Shared living. Although it is your property – the rented units are the tenants home. If you are very controlling or very picky about the exterior, guests, etc., then maybe it’s not such a good idea.
“Knocks on the door”. If tenants know where you live, they are more likely to knock on your door to let you know when something is needed. You also do not have a lot of privacy as tenants will watch when you come and go.
Tax deductions. Owner occupied properties do not get all the tax benefits that investment properties do. So, it is always a good idea to consult an accountant before purchasing a plex property.
Conflicts of interest. I see this as one of the biggest cons of owner occupied investment properties. As a rule, while I am very friendly and do have nic conversations with tenants, I do have a “stopping” point. In other words, socializing with tenants and being friends all sounds like a good idea, until there is a problem.
This blog is written with my opinions and my opinions are presented with accuracy but not guarantees. Please talk to a professional before making any real estate, financial or agency decisions. Gabrielle Kamahele Rhind - 2014. If you want to reprint parts of this - just email me for my permission: KGCProperties@gmail.com .