Purchase an owner-occupied 2–3 unit property that provides a comfortable place to live, substantially reduces monthly housing costs, and does not require a major rehabilitation project.
I am not expecting a "dream" deal or something unnattainable in the current market (1% rent-to-value, having my mortgage completely covered by a tenant or tenants, etc).
- Legal 2–3 unit residential property
- One unit available for owner occupancy
- Property is financeable with conventional, FHA, or another appropriate owner-occupied loan
- Zoning, certificate of occupancy, tax records, and physical unit count are consistent
- Safe and habitable at closing
- No major structural, foundation, roof, water-intrusion, electrical, plumbing, sewer, or heating issues
- Verifiable rents, leases, taxes, insurance, and operating expenses
- Rental income supported by current leases or credible market comparables
- Comfortable owner’s unit with acceptable condition, layout, privacy, and parking
- Location is suitable for both personal occupancy and long-term rental demand
- Purchase leaves a substantial cash reserve after closing and immediate repairs. My current liquid cash reserves are around $150k.
- I'm looking for a property between $300k - $600k.
- $4300 / month or less in PITI (not counting rental income)
- Property should remain affordable with conservative assumptions for vacancy, repairs, maintenance, and capital expenses
- Deal should not depend on immediate rent increases, refinancing, rapid appreciation, or converting unapproved space into another unit
- Immediate repairs must fit comfortably within the available budget
- Illegal, unpermitted, or unverifiable units
- No dependable path to occupy one unit. It's okay if a unit is not immediately available.
- Major structural damage or persistent water problems
- Serious fire, mold, environmental, sewer, or foundation issues
- Open-ended zoning, variance, permit, certificate-of-occupancy, or code-enforcement problems
- Seller will not provide access to every unit
- Seller will not provide leases, rent records, utility costs, or operating expenses
- Property only makes sense using unsupported projected rents
- Immediate work would consume most remaining cash reserves
- Serious inherited tenant problems, including major arrears, active eviction disputes, unauthorized occupants, or conflicting lease information
- Property cannot be carried through a vacancy or significant repair
- Owner’s unit or immediate neighborhood would be unacceptable to live in
- Separate utilities
- Cosmetic improvements rather than major system replacements
- A vacant owner’s unit requiring little or no work
- Individually controlled heating and cooling
- Convenient access to employment centers, transit, shopping, and services
- The unit breakdown is optimized for a single owner occupant. e.g. I would prefer a triplex with two 4 bedrooms and one 1 br rather than a duplex with two 5 bedrooms. I am just by myself and those other rooms would really just go to waste.
- Existing tenants with documented payment histories