An owner-occupied property simply means that the property owner lives in one of the units as a primary residence while renting out the rest. For many people, this is a smart investment strategy – essentially, the tenants pay the mortgage (in a roundabout way), and you can use the money to make improvements or other investments.
How to Start Real Estate Investing with an Owner-Occupied Property
This is a great strategy for first time real estate investors looking to learn how to manage short or long-term rentals. This method offers easier financing, free living, and property management convenience. Here’s how you get started.
- Decide what you want
- Search for the right property
- Finance your purchase
- Make an offer and close
- Rent the units
Decide What You Want
Step one is to decide what you are looking for. Consider how much you are willing to spend, what neighborhoods you are interested in, what property condition you prefer, and what kind of property you want. You can choose a duplex, triplex, or fourplex.
Search for the Right Property
When you know what you want, start searching. You can browse Craigslist, use a property finder tool, or drive around and look for “For Sale” signs. Also, you can network with real estate investors at open houses, seminars, or local meet ups and online forums. There are several ways to search for properties. Utilize these and look for a great deal.
Owner occupied rental property mortgage typically comes with a lower interest rate and lower down payment compared to single family homes. These are some of the financing options available for owner occupied multi-family homes:
- VA Loan– Available to former or current military members and their spouses, this loan requires no down payment or minimum credit score. Additionally, VA Loans offer easier qualifications and lower closing costs.
- FHA Loans- Offers a low down payment, low interest rates, and very strict eligibility criteria. Lower than average credit scores may still qualify.
- Conventional Loans- The size of the property will determine the maximum loan amount. Lenders look at your debt, income, credit score, and payment/credit history.
Make an Offer and Close on The Property
Once you have secured financing and chosen a property, its time to make an offer. You may wish to use the services of a real estate agent at this point. An experienced agent can help you negotiate a good deal. When an agreement is reached, you need to inspect the property and make a list of things that need to be fixed. You may re-negotiate with the seller based on necessary repairs. Then, you just need to close on the property. Your agent will assist you with legal issues and paperwork. This can be done at a local attorney’s office or title company, depending on your location.
Rent the Units
Finally, after you have chosen a unit, you can show the property, rent out the units and begin your cashflow. Later, you can always change from owner occupied to a rental property strategy by moving out and renting the entire property out.
Whether you choose a duplex, triplex, or fourplex, these steps will help you start making money with an owner-occupied rental. It’s not as hard as you think!
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