Since you’ll live on the property, general maintenance and rent collection will be much easier than tracking it from afar. Not paying someone else to manage the property could also save 5-10% on the gross rent amount. Explore all the benefits of investing in a multi-family property in New Orleans.
Owner-occupied multi-family real estate investing could be a great strategy that comes with the ease of property management and lower mortgage payments.
There are multiple benefits when the investor lives in one part of a multi-family property and rents out the rest. The ease of property management, better financing options, and lower mortgage payments are the top three right off the bat.
Steady Income
In a thriving rental market like New Orleans, just buying a shotgun and living on one side and renting out the other could be a wise real-estate investment move. The rent from the other unit could potentially cover the mortgage payment. (The average price nationally for a two-bedroom is $1,377, and $1,510 in New Orleans.) Not sure what you should charge for rent in your area? Use rentometer.com to determine the average rents in the area.
Better Financing Options
With the rent you’re collecting from your tenants, you can show a larger income overall so even first-time buyers could use the potential rental income to help qualify for the purchase. You’ll still need to have the down payment, fairly good credit, and a low debt-to-income ratio, but lenders tend to be willing to apply a sizable portion of the tenants’ rental amount towards the buyer’s income.
Multiple-family properties could be easier to finance than single-family homes because they’re investment properties. And since you’ll be living on the property, you may end up with a better interest rate and favorable lending terms because lenders tend to assume the owner-occupied properties are better cared for than rental residences. This could mean:
- Better interest rates
- Smaller down payment requirement
- Higher percent financing
- Easier time qualifying
Easier Property Management
Since you’ll live on the property, general maintenance and rent collection will be much easier than tracking it from afar. Not paying someone else to manage the property could also save 5-10% on the gross rent amount.
Being a hands-on landlord may also result in better overall maintenance of the property. Addressing any maintenance issues right away saves money on repairs and maintenance in the long term. Plus, tenants who have landlords next door tend to treat the property better. A good track record on both sides could go a long way toward building trust and a good business relationship between you and your tenants.
Deductions and Other Tax Advantages
Tax rules for investment properties can be complex but are necessary to be aware of — especially if you plan to take the write-offs. One advantage of owning rental property in New Orleans is the ability to annually deduct from the building’s income the cost of capital improvements and a portion of the building’s cost. It’s prorated to the rental property portion but can still amount to considerable tax savings.
Mortgage interest deduction is another tax-related advantage that works in your favor as a rental property owner. It’s also prorated to the rental part and allows you to deduct the interest portion of your mortgage payment from your income.
Depreciation write-off is yet another option for resident-owners of rental properties. As a property owner, you can claim a portion of your building’s value as a deduction against expenses every year.
Owner-occupied properties are also often exempt from certificates of occupancy and some rent control programs and rental regulations, so you won’t be subject to the regulations required for the properties solely used for rental income.
Multi-family homeownership comes with great financial rewards, but the decision must be carefully vetted against the responsibilities of finding suitable tenants and maintaining the property. Contact us to determine whether this form of investing is right for you. We’ll help you balance the advantages of investing in a multi-family property in New Orleans against any concerns you may have, and help you find the best options the city has to offer.