Bonus: Can I Buy an Apartment Building and Live in One?
Purchasing an apartment building and living in one unit while renting out the others, also known as "house hacking," is a unique investment strategy that can provide financial benefits and the opportunity to live in a larger, multi-family property. However, it's important to understand the laws and regulations around owner-occupied multi-family properties, as well as the responsibilities and challenges of being a landlord. In this article, we'll explore the ins and outs of "house hacking" and help you decide if it's the right investment strategy for you.
Can you legally live in an apartment building you own?
Before you consider "house hacking," it's important to understand the laws and regulations around owner-occupied multi-family properties. In most cases, it is legal to live in an apartment building you own as long as the property is zoned for residential use and meets any other local regulations. However, some cities have stricter rules about owner occupancy, such as requiring a certain percentage of units to be owner-occupied or limiting the number of units that can be rented out. It's important to research and understand the laws in your area before purchasing a multi-family property with the intention of "house hacking."
The benefits of "house hacking"
One of the main benefits of "house hacking" is the potential for financial gain. By living in one unit of an apartment building and renting out the others, you can potentially offset the cost of your own living expenses. In some cases, you may even be able to make a profit from the rental income of the other units. This can be a great way to generate passive income and build wealth over time.
In addition to the financial benefits, "house hacking" also offers the opportunity to live in a desirable location that may otherwise be out of your price range. By purchasing a multi-family property, you can potentially afford to live in a more expensive area by taking advantage of the rental income from the other units.
There are also personal benefits to "house hacking." By living in the same building as your tenants, you have the opportunity to interact with and get to know your renters. This can be a great way to build a sense of community and make new connections.
Overall, "house hacking" offers a unique combination of financial, personal, and community benefits that may make it an attractive option for those looking to invest in real estate.
How to finance the purchase of an apartment building
When it comes to financing the purchase of an apartment building, there are a few different options to consider. One option is to obtain a conventional loan from a bank or mortgage lender. These loans are typically available for multi-family properties, but you will need to have a good credit score and a down payment of at least 20% to qualify. Another option is to obtain an owner-occupied loan specifically designed for multi-family properties. These loans often have more lenient credit and income requirements and may require a smaller down payment. However, they may also have higher interest rates and more strict guidelines for owner occupancy.
It's important to carefully research and compares your financing options to determine which one is the best fit for your financial situation and goals. It's also a good idea to work with a lender or mortgage broker who has experience with multi-family properties to ensure that you are getting the best deal possible.
How to manage an apartment building as a landlord
If you decide to "house hack" and live in an apartment building that you own, you will also be responsible for managing the property as a landlord. This includes maintaining the property and ensuring that it is in good condition, screening tenants, collecting rent, and handling any repairs or maintenance issues that may arise. Being a landlord can be rewarding, but it can also be challenging and time-consuming. It's important to be prepared for the responsibilities and challenges of being a landlord before you take the plunge.
One way to mitigate some of these challenges is to hire a property manager to handle the day-to-day management of the building. This can be a good option if you don't have the time or expertise to manage the property yourself, but it will also add to your expenses.
"House hacking" vs. traditional rental property investment
One of the biggest differences between "house hacking" and traditional rental property investment is the level of personal involvement. As the owner of an apartment building, you will be responsible for managing the property and interacting with tenants on a regular basis. This can be a rewarding experience, but it also requires a significant time commitment and may involve dealing with difficult tenants or unexpected repairs.
On the other hand, traditional rental property investment typically involves hiring a property management company to handle the day-to-day responsibilities of being a landlord. This can be a good option for investors who want to be less hands-on and have the financial resources to cover the management fees.
Another difference between "house hacking" and traditional rental property investment is the level of risk. As the owner of an apartment building, you are taking on more risk than you would as a traditional rental property investor. You are responsible for the entire building, rather than just one unit, and you are relying on the rental income from multiple units to cover your expenses. This can be a riskier investment, but it also has the potential for higher returns if the property is well-maintained and the units are consistently rented.
House hacking" can be a unique and potentially lucrative investment strategy for those looking to get into real estate. By purchasing an apartment building and living in one unit while renting out the others, you have the opportunity to live for free or even turn a profit from the rental income.
However, it's important to carefully consider the legal, financial, and practical considerations involved in this type of investment. Owning and managing a multi-family property comes with its own set of responsibilities and challenges, and it's important to weigh the pros and cons against traditional rental property investment. Ultimately, the decision of whether "house hacking" is right for you will depend on your financial goals, personal circumstances, and comfort level as a landlord. If you're considering "house hacking" as an investment strategy, be sure to do your due diligence and seek the advice of a financial professional before making any decisions.
If you're interested in learning more about the benefits and challenges of house hacking and whether it could be a good investment strategy for you, don't hesitate to reach out. We would be happy to provide more information and answer any questions you may have.
