Buy 1 Chicago owner occupied investment property, live for free, and make a million bucks! It’s as simple as that right?
As many Chicagoans try to navigate today’s tricky real estate market and make the right moves, a trend has gained a lot of attention and popularity: owner occupied investment property. These are multi unit buildings in which the landlord/owner lives in one of the units while renting the others out. There are many pros and cons to consider when contemplating buying an owner occupied investment property.
My goal of this article is to help you determine if an owner occupied investment property is right for you?
Financial Benefits Of A Chicago Owner Occupied Investment Property
The most obvious pro for an owner occupied investment property are the financial benefits. Who wouldn’t want to have their mortgage, or a big chunck of it, paid for by their neighbors? And if it’s a larger property with more than a couple units to support it, your neighbors will not only pay for you, but could make you a potentially make a profit!
On top of all of this, you are also stocking up equity in your property every month! So your cost of living is greatly reduced while you’re stashing away cash on a monthly basis.
Putting together a pro-forma for the building and calculating income and expenses with a Real Estate professional could make this task much easier and ensure you’re buying yourself a money maker instead of a bottomless pit. I’ve seen many buyers overpay on an owner occupied investment property thinking it’s a good thing just because they have income coming in.
Little do they know that they could have leveraged much better cash flow from other properties. The best thing you can do to make a wise financial decision is to subtract the monthly income from the carrying cost of owning the building so you know what YOUR bottom line is.
Tax Benefits Of A Chicago Owner Occupied Investment Property
Another often over-looked benefit of buying an owner occupied investment property are the double-sided tax deductions you can claim on this property. These types of properties are treated like hybrids, and let you claim BOTH personal and investment deductions! Just like a typical owner occupied residence, you can claim your unit’s proportion of mortgage interest and real estate taxes on your personal return.
On the flip side, all of the rental units are treated like a regular income generating investment and you can write off all of your typical expenses such as utilities, maintenance, etc. This goes WAY beyond the normal deductions for interest and taxes. Combine the tax advantage of both and you’ll have a pretty nice write off at the end of the year.
Personal Preference Benefits Of A Chicago Owner Occupied Investment Property
In addition to monetary value, purchasing an owner occupied investment property also gives you more control over your surroundings and your neighbors (within reason and within legal capacity).
Ugly paint colors in the hallway? Do you like flowers on your front porch?
Paint them or plant them!
Always wanted that satellite dish but your landlord would never allow you?
Slap that baby on your roof!
Don’t like cigarette smoke?
Allergic to cats?
Remember your old neighbor’s two pound dog that barked at EVERYTHING?
Make your building a smoke-free or pet-free building.
Don’t like noisy neighbors above you? Or have trouble with stairs?
Pick whichever unit to live in, you own the building!
As long as your choices are reasonable and ethical, they are totally yours to make.
Chicago Owner Occupied Investment Property Cons
On this note we dive into the cons of having an owner occupied investment property. Although the list is short, it’s something very serious to consider.
The lesser of the cons is the fact that you are extremely close and convenient for all of your tenants and their needs.
Dispute over noisy neighbors in the hallways?
Grass wasn’t cut on time?
You are about two sets of stairs and a knock away. Makes it pretty easy to share thoughts, complaints, and comments (at all hours and on holidays). Being an owner and occupying your investment means you are the front line for all and any issues that may arise. The place you call home will now also be a place that requires your attention and some work if you plan on managing it yourself.
The greater of the cons is that you are also assuming responsibility and liability for the building, the tenants within it, and the leases associated with them. An owner occupied investment property is subject to the Federal Fair Housing Act just like any other property out there. You are now dealing with a variety of personalities that will reside in your building. You have to make sure your tenant selection processes are consistent and ethical, that your leases protect you but are fair and legal, and if a problem or dispute erupts that you can handle it either through insurance or legal avenues. Evictions are no cake walk, but having a Realtor and/or property manager to help buffer this could be a great idea and a time saver.
The important decision lies with weighing out the benefits, understanding the responsibility you are assuming, and figuring out if it works for you.
Remember, you don’t have to go at it alone! Owner occupied investment properties can be handled in a variety of ways with many levels of help. I’d love to assist you with the acquisition of the property, rental process, and even management of the building. It’s a feat to tackle and a job within itself. Managing a 100-plus units myself, I know the drill and can be a great resource!
Did this help? Help me get the word out and share this article! if you have any questions feel free to contact me. This is what I do and would love to hear from you about any owner occupied investment property questions you may have.
Fulton Grace Realty