Buying VS Renting. Which is Better?
One of the smartest ways to build wealth is buying real estate. Rental property not only brings in monthly cash flow but also appreciates in value and there are tax write offs. But lets face it, most of can’t afford to buy rentals while affording our own home. This is why buying a duplex or a multi-plex and living in it is a great way to start investing in real estate.
Here is what you need to keep in mind:
1.) Your location is limited, multi-family units aren’t found in may suburban neighborhoods, so it may make it hard to find somewhere you are happy with.
2.) Owning a multi-family and living in it allows your to get a rent check to offset the mortgage payment.
3.) You are living on the property so you will have a birds eye view as to how your tenants are maintaining their unit and you are right their for emergencies.
4.) You may think financing such a deal is difficult, but surprisingly it is not. You can get an FHA loan because you will be living in it with 3.5% down. Also the rental income you will be receiving will count as monthly income which helps you not only qualify but to perhaps qualify for a bigger purchase price.
5.) Once it comes time to leave and purchase another home you will have an asset with equity and rental income, now for two units. You will have a mortgage payment history, hopefully a good one. Never be late. All this will help you qualify for your next purchase.
6.) You may have trouble setting boundaries with your tenants. They may think it is ok to bother you at all hours of the night because you are right there.
7.) If you have to evict a tenant living next door to them can make the process very uncomfortable.
8.) Choosing the wrong tenant will affect your life, in the event they mistreat the property, play their music too loud, yell a lot etc.
9.) There is a certain amount of risk involved like maybe you will have to go without rent due to an eviction or not being able to find a qualified tenant.
10.) You need to check with an accountant or tax advisor because you need to know not only what is involved with claiming the rental income but also you do not want to miss out on any of the valuable tax deductions that come with owning an investment property.
11.) You definitely give up some of your privacy.
12.) A multi-family property typically appreciates quicker and is more resilient when there is a downturn in the economy.
13.) If the economy is doing poorly the demand for rentals increase.
So there are pros and cons like any other major decision in life, but if you are going to move forward congratulations to beginning the journey of becoming a real estate investor.
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