10 Pros and Cons of an Owner-Occupied Rental

As a real estate investor, you have choices for buying an income property. You could purchase a home you rent out to others or buy a home with multiple units, where you occupy one and rent out the rest. There are pros and cons to going the latter route, so here's what you need to know.

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It's easier to make sure your tenants are following your rules when you live under the same roof. Because you're close by, your tenants may be more apt to stick to their lease terms, such as not smoking indoors or not having pets (if prohibited). The result? Less hassle.

ALSO READ: 7 Mistakes Every New Landlord Makes (and What You Should Do Instead)

As a landlord, it's on you to address issues that arise with your tenants' homes. But if you live on-site, you'll have an easier time popping over to fix leaky faucets and deal with similar repairs.

If you live far from your income property, it may not be feasible for you to show up every time an issue arises. That's what property managers are for. But there may be no need to hire a property manager if you have an owner-occupied rental, and that could be a huge money-saver.

ALSO READ: Real Estate Investing: Is Hiring a Property Manager a Huge Waste of Money?

When you own a home, you can take deductions like mortgage interest and property taxes. But when you have an owner-occupied rental, you can deduct certain maintenance expenses as well.

ALSO READ: Could You Reduce Your Property Taxes in 2022?

Chances are, you're not looking to purchase your next property outright. The upside of buying a rental you also intend to occupy is that you may have an easier time getting approved for a loan.

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If you're a person who values privacy, you may not like the idea of having to live among your tenants -- or anyone, for that matter. If that's the case, you may be better off buying a single-family home to live in and purchasing a separate income property.

ALSO READ: 3 Reasons Landlords Should Invest in Single-Family Homes Today

Having access to you as a landlord could make your tenants more apt to complain about little things they might otherwise let go. That could leave you with more ongoing headaches to deal with.

It will probably cost more money to purchase a property that can accommodate you plus your tenants than to buy a home you occupy solo or a single-family rental. That could mean tying up more cash than you're comfortable with.

ALSO READ: Why I Decided To Turn My Home Into a Rental Property

Owning a larger property could mean spending more on upkeep. And that's an expense that could eat into your profits.

Some tenants may not like the idea of living under the same roof as their landlord. That could, in turn, make it more difficult to get leases signed, which could impact your bottom line.

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Buying a home you live in and rent out simultaneously could end up being a wise financial decision. Just make certain to think things through before diving in.

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