How well are you using CRE tech? See how you stack up. Take our 2-minute survey!.

4 Benefits of Investing in Owner-Occupied Properties

Table of Contents

If you’re looking for a new investment—and a new place to live—look into owner-occupied properties. With this type of investment, you’d buy a multifamily property and move into one unit. Then, you’d rent out the other units. This way, you get a new home and a new way of generating income. As long as the property you buy is your primary residence, you will see several benefits from this investment strategy. So whether you’re thinking about buying a duplex, multi-unit apartment building, housing co-op, or mixed-use building, take a look at the main advantages of owner-occupied properties.

1. Generate Income That Helps Pay Your Mortgage

As you might imagine, the biggest benefit of owner-occupied properties is the consistent income they generate. The amount you make every month will depend on the rental market in your area and the number of units you’re renting out. But even if you buy a duplex, your tenant’s monthly rent can cut your mortgage payment in half, at the very least. And if you have several units to rent out, your rental income could surpass your mortgage payment completely, giving you passive income every month.
Either way, you’ll get a lot of help with your own housing costs. Whether you buy an investment or not, you have to live somewhere. This means you’ll be paying rent or mortgage every month anyway. So why not get help to cover those costs by looking into owner-occupied properties? Keep in mind that you can choose either a strictly residential building or a mixed-use property that allows commercial and residential units. So consider whether you want to rent to tenants looking for a home or business owners looking for office space. Basically, you have lots of options when it comes to owner-occupied properties that may work for you.

2. Cut Property Management Costs

When you buy an investment property that you don’t live in, you typically have to pay a property management company to screen tenants, collect rent, perform maintenance, and more. This can cost about 10% of the rent every month. But when you live on-site, the need for a property management company goes down, especially if you only have one or two units to rent out. Living on the property can make it easier for you to make minor repairs or at least get alerts faster to any issues that require you to call a professional to fix.
Not only will doing the job yourself save you money, but you also get to screen tenants personally, which may help you feel more at ease about renting out your property. In fact, when tenants know the owner lives at the same property, they tend to put more effort into keeping their unit clean and quiet, which can make your life easier as a landlord. This is why experts often recommend that new investors start with owner-occupied properties, as this type of investment is a simple way to begin making money in real estate.

3. Enjoy an Easier Financing Process

When you apply for a home loan, the lender always asks if you plan to live on the property. This is because many loans are only available for you to use on owner-occupied homes, not investment properties. So even though you’re planning to use the property partly as an investment, the fact that you’ll also be living there will allow you to qualify for home loans that you couldn’t get otherwise.
There’s also the fact that home loans for owner-occupied properties require lower down payments and come with lower interest rates than loans for investment properties. This is because they’re considered lower risk, as they’re less likely to lead to a mortgage default than investment homes. After all, you’ll be treating your property as a home—rather than strictly a business that generates income—since you live there. You’re more likely to put time and money into maintaining the home when you’re occupying it, keeping up its value. So it makes sense that lenders would want to make it easier on you to buy this type of property than a house you’ll never live in, which leads to an easier borrowing process for you.

4. Qualify for More Tax Deductions

One of the main reasons people want to become homeowners is to get tax deductions that can add up to big savings. But owner-occupied properties can lead to even more tax benefits, as they’re treated as both an investment and a residence. So when you buy one, you get access to deductions that you wouldn’t have if you had simply bought a single-family home or an investment property.
For example, since the IRS looks at your owner-occupied unit as a house, you can write off your property tax and mortgage interest just as you would with a single-family home. Then you get additional tax benefits from the operating expenses associated with the units you’re renting out, because they’re treated as investments. This means you can deduct the cost of repairs, home improvements, insurance, and any other expenses that are necessary for you to pay as the owner. And if you pay for the utilities for the tenants in the building, you can write off that expense, too. Of course, you’ll want to talk to a tax professional to get more specifics on what you can deduct with owner-occupied properties. In general, you can expect to see some savings on your taxes with this type of investment.

Your Next Steps

Clearly, owner-occupied properties come with several benefits that can save you money on your living expenses at the very least—and even generate additional income for you in most cases. Whether you’re a seasoned investor or just getting started on real estate investments, buying a property that you can live in and rent out at the same time is often recommended.
If you’re ready to try out this type of investment, come to ProspectNow for help. We have the only platform that uses predictive analytics to let you know important information about residential and commercial properties you might want to buy. Whether you want to know property details, past liens, tax payments, ownership information, or other helpful data before you make an offer, ProspectNow makes it easy to find out what you need to know for a smooth sale. Contact us today to learn more about how we can help you find properties to invest in!

Select your Property Type

Search Residential Properties

Includes Single Family Residential Properties

Search Commercial Properties

Includes All Property Types