One of the most recent trends in the real estate industry is owner occupied properties, a cost effective solution for homeowners and entrepreneurs alike. Whether you are trying to generate more income for future investments or you are simply looking to consolidate your living expenses, here are four reasons to consider an owner occupied unit for your next home.
Dealing With Responsible Tenants
When you live in your own rental property, it is easier to keep an eye on your tenants. Fortunately, neighbors who share the same building or duplex with the landlord tend to demonstrate more courtesy and respect. If you do decide to sell in the future, you won’t have to deal with neglectful tenants or expensive repairs that could lower potential offers on the property.
Combining Depreciation and Deductions
One of the main reasons owner occupied rental are on the rise is the combined tax benefits from mortgage interest and depreciation. As a matter of fact, some borrowers cannot qualify without the full range of deductions, including property taxes and prorated interest. Furthermore, financing terms are generally more favorable for owner occupied units when compared to traditional property loans. In the eyes of a lender, this increases your cash flow and reduces taxes on your rental income.
Minimal Maintenance and Repairs
As the owner of a rental property, you will probably assume most of the managerial responsibilities. This means you can save money on wages and maintenance by performing the work independently. If you choose to hire someone for this position, be prepared to set a aside a portion of your income for salaries and repairs. Either way, someone has to take responsibility for the property and the safety of its tenants.
Better Options for Financing
An important step for financing owner occupied properties is to discuss the details of the down payment. Investment properties offer little flexibility in this arena, demanding up to 25 percent down depending on the situation. For an owner occupied residence, you can expect a 10 to 15 percent decrease, especially if you qualify for an FHA loan. However, it is recommended that you commit to at least 20 percent of your down payment despite the minimum requirement stated by your lender.
When it comes to owner occupied properties, the benefits are unquestionable, but you must be willing to put the extra effort into maintenance and recordkeeping. Take this as an opportunity to learn about owner occupied real estate and use this knowledge as a stepping stone for long-term financial development.