7 Signs that Buying an Income Property Might Be the Right Choice for You
If you are considering purchasing a home, you have likely already read everything you can get your hands on espousing the pros and cons of owning your own home. Rent vs. Buy has become one of the big debates of our time, but what do you do if you are solidly on team Buy, but the numbers just don’t add up? Read on for signs that a small multifamily property (meaning a duplex, triplex or fourplex) may be an option for you.
1. The rental market is tight in your city
Unless there are major changes in housing stock or rental laws on the horizon, this is a great indicator that your future rental unit(s) will be in high demand.
2. You’d have a hard time affording a mortgage payment on your own, but property values are still going up
It will only get harder to get into the market, so using rental income to help get your foot in the door could make all the difference. Many lenders even let you consider the value of rent collected as income when qualifying you—just make sure to account for a month of vacancy per year on average.
3. You need to diversify your income
Maybe you want to build up a stable base to work from while you start your own business. Or if you and your partner work in the same field, another income stream can help cushion the blow of industry changes or a down economy.
4. You don’t like spending money
There’s nothing wrong with being frugal! Rental property puts your money to work double-time, paying off now in rents and later in home value if you sell.
5. You have extended family to plan for
A rented unit doesn’t have to stay rented forever. A duplex can be a great way to plan for the care of elderly parents, giving you just enough space.
6. You have a flexible schedule
While many blogs tout real estate as ‘passive income’ I can promise you there is nothing passive about repairing your tenant’s toilet or running credit checks.
7. You have cash to invest
Not only should you have enough for a down payment and closing costs on hand, you should plan for at least a month of vacancy per year, any improvements you want to make, as well as enough to cover an emergency water heater replacement or termite treatment. After all, you may choose to defer maintenance on your own unit, but you will likely be legally required to make repairs for your tenants.
This all sounds daunting, but this is all money that goes towards maintaining or improving your property value and earning income through rent. If you can swing the investment up front, with careful planning it can pay dividends throughout your life.
Have you ever bought an income property? Do you have any advice or experience to share?