If you want to save on housing costs, the usual council is to move to a smaller house. But some people go in the opposite direction, investing in duplex, triplex or quadplex. By living in one unit and renting the rest, these so-called "housekeepers" can use the rental income to pay their mortgage loans and basically live in their home "free".
Housekeeping is not for everyone; There are some residence costs involved in buying a duplex and getting it ready, and you must also be willing to take responsibility for becoming a landlord.
I went to two housekeeping experts, Chad Carson from CoachCarson.com and Craig Curelop from the real estate investing social network BiggerPockets ©, to learn more about what it takes to buy a duplex, how to budget for the project and how to find good tenants. If you have ever considered buying a duplex and renting out the vacancy, use this advice to help you decide whether it is time to start a housekeeping project. Here are the 5 most important questions to ask:
Who should consider buying a duplex and becoming a landlord?
Carson: I have had a lot of success with directly owning properties as a landlord, but I have come to realize that it is not for everyone.
Think about your free time first. When you first start buying and managing the duplex is like a part-time job. When you search, buy and maybe rebuild a property, it can take another 10-30 hours per week. Eventually, when things sit down and you get a stable tenant, you can spend much less time. For example, I spent 1-2 hours a week on my portfolio of rental properties while living abroad in Ecuador for 17 months.
The second question is temperament. I find those who are attracted to being a practical landlord are those who want more control and freedom as an entrepreneur. But in exchange for these benefits, you must also be willing to take on more responsibility.
On the bright side, this entrepreneurial structure can give far better results than just passively investing in the market. But the challenge is that you also have to be okay to handle people, situations and make regular decisions. For example, if you are going to lose sleep and stress out because you have to decide on a plumbing leak, you may want to reconsider being a landlord.
I remember once again calling for a water heater leaking at our rental while my wife and I were traveling on the southern tip of South America on the Magellan route. It was pretty much just a sea between us and Antarctica! We were ready to go on a trip in the penguin colony when I got the message, so I called my trusted plumber, told the situation, asked him to handle it and continued to see the penguins.
If prospects of these types of calls or situations cause you to lose sleep, you may want to reconsider being a landlord.
Curelop: I will advocate this by saying that anyone can hack. There are different levels of housekeeping, some of them more aggressive than others. The most aggressive buys a house and rents it while staying under a bridge, but most do not want to. The traditional way is to buy a duplex or quadplex, stay in one unit and rent the other units so that the rent from these units covers your mortgage. Anyone can do it: a single person, a couple, a family.
If you are a family that wants a little more space than you can get from a square, you can buy a large house with an additional home. You can Airbnb or rent the extra home, which will partially offset your mortgage. Instead of paying $ 2K or $ 3K each month for your loan, you pay half of it.
Is it better to buy a built-in finished property or a fixer-top?
Carson: An old mentor of mine used to say "always look for good dogs with fleas". What he meant was that the best offers otherwise are good properties with problems. It's the idea to buy the worst house in a good street. So, fixer-uppers are really a common property challenge that you can learn to overcome in exchange for a lower price.
Of course, the challenge does not go over the head with a fixer-upper as a new investor. I recommend that you stick to cosmetic rehabs, where you can renovate landscape architecture, paint, windows, new floors, new countertops, new lamps etc. You can also make money to move walls or rip out the entire kitchen or bathroom, but much more can go wrong too.
Curelop: To add the most value and produce the greatest net value, you want to buy a fixer-upper. However, there will be more work, more time and more upward costs. If you are looking for something a little less risky, I would get something that is ready to live in. If you get an owner-occupied loan, you must be ready to stay there 60 days after closing.
Finding a place that needs some cosmetic updates – maybe fixing cabinets or adding new lamps or floors – is a great way to increase the value of your house while you can rent it quickly.
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