anyone live in Multi-family housing?

  • solak

    Posts: 493

    Jul 13, 2010 2:35 PM GMT
    am thinking of buying one and letting the 2 tenants pay off the house...

    is it too much of a headache to deal with tenants and bullshit? i have enough savings for a large down (70%+) and can even buy full cash.. but dont want to put too much cash in one investment at the moment being that im young and want to diversify.
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    Jul 13, 2010 2:36 PM GMT
    Take the money, buy a small house, and use the rest to hire a hot houseboy.
  • solak

    Posts: 493

    Jul 13, 2010 2:42 PM GMT
    multi-fam IS a small house icon_razz.gif and as for houseboy.. there are enough gays willing to do house chores to keep their fabulosity of keeping an infiniti g35, gay cruises, seven jeans despite having no home/equityicon_cool.gif
  • rnch

    Posts: 11524

    Jul 13, 2010 3:14 PM GMT
    unlike the above repliers; i will give you a serious answer.

    i own an old new orleans style "shotgun double" house, which is two 900 sq ft otherwise separate houses, except they share the same inner wall.

    i found two problems with the "living on one side and renting out the other side" concept:

    first off, dealing with renters. otherwise normal appearing people can turn into demanding, pithy, late paying, interior destroying azzhoals over the time of a 1 year lease.

    hiring a property manager was the best thing i did. for 10% of the rent, she advertises the vacancy, screens potential renters, collects the rent, has minor repairs done, and deals with all those strange azzhoals.

    second issue: noise. this house was built in 1911, no isulation on either side of the common wall. i could literally hear them next door boinking, coughing watching tv, even talking loudly.

    i suggest you make sure any house you buy is well inusulated.

    the income tax deductions are awesome. any receipt that vaguely resembled a house item was saved for income tax deductions, any improvements that i made on either side was "wrote off". my tax refund was anywhere from 2 to 4K higher each year.

    i would also suggest that you make sure you have plenty of personal liability insurance on you and the property...there's no telling what some devious tenent would try to sue you for in today's litigation-prone world.
  • solak

    Posts: 493

    Jul 13, 2010 4:00 PM GMT
    thanks rnch..

    big question, funny i was just looking at personal liability (pretty cheap at 100+ bucks or so for $1mm coverage...im a bit confused though, as i understand you have landlord homeowner insurance which covers $500,000 max (i think?) for injury on tenant.. landlord insurance is a tad pricier...

    now taking this logic, why even bother with landlord insurance (for slip and fall case with tenant) when personal liability insurance is much cheaper and coverage is higher?? thanks man. let's assume he uses his furniture, not yours in his apt of which he's liable for getting tenant insurance (also cheap)
  • rnch

    Posts: 11524

    Jul 13, 2010 4:18 PM GMT
    solak, given the hurricane and flooding history of new orleans (even though my houses are on the so called "sliver along the river" of high(er) ground); i have advised my rental tenents to aquire "renter's insurance" for their interior furniture and contents.

    i have a disclaimer in the lease mentioning that no interior items are covered by my insurance.

    now if they actually do that, i have no idea. icon_rolleyes.gif on one side i have two flaky, spacy gay guys in their early 50's, who only seem to hear every 5th word spoken to them....or perhaps they just hear what they want to hear...icon_lol.gif
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    Jul 13, 2010 5:06 PM GMT
    Solak,

    Have owned and lived in my 2-family home for 12 years now. I think in general the benefits outweigh the negatives.

    Rnch is right the tax-writeoffs are tremendous. Any general repairs to the overall structure are 50% deductible. Half your insurance, taxes, any legal fees are deductible. Anything specifically for the rental unit, 100% deductible. Keep every damn receipt you can. Hell, I've claimed cat litter because I needed it to get some traction under in my driveway during the winter. I havea manila envelope where I put all my receipts throughout the year, then I organize them in January before getting my taxes done.

    Don't hesitate to do background and credit checks of prospective tenants. But also trust your instincts about who you are renting to. Brush up on your state's rental laws. Always encourage your tenants to get renter's insurance (it's really cheap).

    In my house, have a rental unit means you have twice the things to worry about. 2 hot-water heaters, 2 boilers, etc. Also when you are looking for a house, it's good to find a house that has separate utilities (electricity, natural gas, etc...), otherwise you have to include the utility usage in the rent.

    Sometimes you get great tenants who keep the place spotless, and sometimes you get slobs.
  • solak

    Posts: 493

    Jul 13, 2010 5:11 PM GMT
    what scares me is not so much the upkeep of the place and repair..its the fact that there are people out there who make it their agenda to sue you exploiting their tenant rights, especially in multi-fam neighborhoods..

    what if a tenant "slips and falls" looking for a payout.. would your home/landlord insurance cover the first $500k, then personal liability cover $1mm plus, depending on coverage??

    i currently own a condo rental (in a PRIME area so never tenant problems), and have a $300k slip and fall coverage... im looking to up that just in case, then get personal liability insurance on top of that.. is my thinking correct? does personal liability insurance truly cover most everything under the hood? thanks
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    Jul 13, 2010 5:22 PM GMT
    Your insurance agent should be able to advise you as to the correct level of coverage you need. You might also want to talk to a financial advisor. If you have many assets (like other properties, savings accts, financial products), it may be best to be your house into a separate trust and your other assets into another trust.
  • solak

    Posts: 493

    Jul 13, 2010 5:49 PM GMT
    thanks ive been looking at putting each property in their own trust or LLC... but upon further review, the people pushing that idea are lawyers just out to collect fees...

    it seems if i have enough liability coverage for both properties i should be fine.. but i have to do more research
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    Jul 13, 2010 6:59 PM GMT
    One more piece of advice, which pretty much applies to anyone buying a property: set up an repair/maintenance fund to deal with anything that may come up, and put money into it on a regular basis, even if you do have to use it for several years. It will come in handy, when the water heater breaks, or you need a new roof. Even if you start with just a couple of thousand, and 500-1000 every year, it will be useful to have.
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    Jul 13, 2010 7:54 PM GMT
    I heard the interest rate on your loan will be lower if the owner occupies the property. But if you plan on paying in cash, I suppose that doesn't matter.
  • rnch

    Posts: 11524

    Jul 13, 2010 7:56 PM GMT
    xrichx saidI heard the interest rate on your loan will be lower if the owner occupies the property....
    true dat! but a double (house) will always have a higher rate than a single. (so sayeth my loan officer)
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    Jul 13, 2010 8:00 PM GMT
    Many true statements are made above.

    I am a roommate kind of a person, so I bought a 4BR 2BA house and rent three rooms to friends. Their rent pays my mortgage, and the maintenance and repairs, and also major improvements. It is the smartest thing I have ever done.

    Go to http://www.nationalreia.com/ to find information on a Real Estate Investors group in your area, and learn more about how to live for free and build up nest egg for the future.

    YES, get a property manager.
  • solak

    Posts: 493

    Jul 13, 2010 11:09 PM GMT
    Single fam houses ie 3br 2 ba (plus basement) are much cheaper in my area than multi-fam.. thing is im not a roomate kinda guy! more power to you though..

    UKxxxxx Profile member (i forgot actual screename).. if youre reading this you IM'ed me about this subject and your experience in UK vs US..

    please email me or IM me again.. sorry I had to run out real quick and you didnt get back in time from the phone, thanks.