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Should You Live Onsite While Renting Your Property

Updated: Jul 22, 2020

When looking at property investment, many people consider investing in a rental property that would allow them to live onsite while renting out other units within the same property. If done correctly, this could allow you to reduce your monthly mortgage payment while also building home equity.

The downfalls seem quite obvious too. You are onsite for every issue. Issues that would normally go unreported will now become problems expected to be fixed immediately. Changing air filters, fridge filters, or batteries in smoke detectors - things that are usually handled easily by a renter - will now become a knock on your door at all hours of the day or weekend.

So, how can you get into the rental market as an investor, making the most of the income, getting the best mortgage available, and not getting bogged down with constant requests from other residents? Let’s explore!

Buy the right sized rental property.

When purchasing a rental property that you intend to live in, it will need to be classified as your primary residence. Properties above a certain size will be classified as commercial property and below a certain size will not qualify as a combined primary residence/ investment property. The golden spot is usually a property with 2-4 units but check with your lending company before you start your search.

Understand that you are still considered responsible for the entire mortgage.

You’ll need to know how much similar properties are renting for, along with what you can personally afford. Keep in mind that a lending firm providing a loan for a property that will generate income will provide you with a pre-approval much higher than you would normally receive. You could qualify for double what you can normally afford, but that loan is presuming that your costs will be covered by renters. If there are no renters currently, you may need to carry the total costs for a short time. Even if there are renters, the change in ownership can sometimes cause friction and you may lose a renter. Be ready for this challenge by having several months of rents tucked away.

Even taking the rental income into consideration, lenders expect the primary owner to be able to afford approximately 75% of the mortgage on their own. This is a fair assessment, although you will hopefully never need to cover it.

Set up the rental property payment system

It’s common to buy a property of rental units as a company rather than an individual as protection to your own assets, so setting up a mailbox for rental payments could help you step away from your tenants and their requests. However, there will be times when you will need someone to collect rent. For these times, as well as taking requests for maintenance or repairs within the units, you may want to consider hiring a property manager.

If a property manager is not within your budget, be sure to create an addendum within your lease documents that clearly states an emergency phone number and a system for non-emergency concerns. It won’t keep the knocks from your door, but it might help.

The bottom line.

Rental properties are an excellent way to get into real estate investment and living on the property is a great way to make money while also keeping an eye on the property. Yes, you may have more responsibilities than if you lived off property, but there are also more opportunities to make upgrades and take care of your investment. After all, if you make money in the eventual sale, this could be just the first property in your portfolio!

If you are looking for the right investment, Regalway Homes has helped dozens of first-time investors get into the property market. Let us be your guide! Get in touch today.

Regalway Homes | | 1 844 977 2679

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