Is Purchasing a Duplex or Multiunit Property Right for You?

Buying a multiunit property, and either living in one of the units or renting out the entire property, has numerous advantages. However, there are many factors that you should consider before making a decision.

This topic is so complex that we’re dedication two blog posts to the subject. The first article will discuss whether buying a multiunit property and becoming a landlord is right for you. Then, if you decide to move forward, the second will provide information on financing options available for these properties.

Multiunit Properties, Part 1: Making the Decision

The Difference Between Multiunit Properties and Simply Renting a Room

While they can be similar, it’s important to understand the differences between owning a multiunit property and simply renting out a room in your house. For legal and tax purposes (as well as the daily life of your family and your tenants) you should understand that they are vastly different and should be considered under distinct terms.

With a spare room, or a basement with a kitchenette, the tenant is basically living in your unit. However, with a multiunit property, each unit will have a separate entrance, kitchen, bathrooms, and utilities. Generally speaking, each unit will have all the same facilities as a single-family home. You can, however, convert large single-family homes into multiple units. This is not uncommon, especially in densely-populated areas, college towns, and other locations with many renters.

Although some principles will overlap, for the purpose of this series, we are discussing multiunit properties only, not renting a room in your home.

Is Being a Landlord Right for You?

Being a landlord has a lot of benefits, including financial independence and the chance to make money off your property. However, it’s not for everyone. To be a landlord, you have to be comfortable with collecting rent from tenants on a monthly basis. If your tenant doesn’t pay, you may have to be assertive, even pushy, in order to get your money; not everyone can handle that. Also, the time may come when you have to evict a tenant, which is never easy. You certainly don’t have to be ruthless, but to be a landlord you do have to be firm and decisive.

As the landlord, you are also responsible for everything that goes wrong in the unit. Whether the garbage disposal leaks or the air conditioning won’t run, you are the one that is responsible for any repairs. You can fix it yourself or hire a handyman, but you are liable for ensuring a comfortable, livable unit.

How Much Money Could Your Make?

It’s the bottom-line question for becoming a landlord, but there’s certainly no easy answer. How much money you may will depend on many factors, including how much you pay monthly for the property (your mortgage payment), local property taxes, and how much you charge for rent. Other factors include the cost of upkeep, repairs, and advertising the unit’s availability.

The easiest way to find out how much you can charge for rent is to simply do a search of rental websites and listings. If you have a specific property in mind for a purchase, search for rental units that have similar amenities, floor plans, and are in the same area. This will give you an indication of how much your property will bring.

You’ll also need to do the math on your monthly mortgage payments and compare that to the potential income. If you discover that the outgoing mortgage payment is significantly lower than the incoming rent payment, you likely have the financial cushion to make a profit. However, if the mortgage is close to the rent cost, there may not be enough room for profit, especially when you factor in taxes, upkeep, and other expenses.

Things to Consider When Buying a Multiunit Property

Location Options Will Be Limited

If you are looking for a duplex or a property with three or four units, and you plan on living in one of the units, you will have to accept that property locations will be limited. Think about the area where you live; no matter which direction you go, you can likely find single-family homes. However, can you think of many duplexes in the surrounding neighborhoods?

Multiunit properties are fairly rare, so finding one in the location where you want to live could be difficult. If you are not planning to live in the unit, this may not be a problem, but if you want to occupy half of your duplex, you may need to be open to living further from work or outside of your preferred neighborhood.

Owning a duplex could bring a steady boost to your monthly income.

Taxes are More Complex

Another issue to renting out part of your duplex is the complexities with taxes. While federal and state tax codes are always changing, there are layers of complexity that make income predictions more difficult. The IRS has pages upon pages of tax rules affecting landlords, so be sure to speak with a qualified tax professional before you purchase a multiunit property.

If You Live Onsite, You’ll Live Next to Your Tenant

The upside of occupying a unit at your rental property is that you live next to your tenants. The downside…you live next to your tenants!

Being close to your rental property certainly has advantages, as you can constantly check on the quality and care of the property; your mere presence could deter tenants from outright destroying and damaging the property. However, if the tenant needs anything, you’re just across the wall. Of course, you won’t have to drive across town (and it is your responsibility anyhow), but your tenants will always know where to find you, which can have some obvious downsides.

When the Time Comes, Selling Can be Difficult

Possibly the biggest issue with purchasing a multiunit home comes years or even decades later. When it’s time to sell, you could have difficulty finding a buyer. As we’ll discuss in part two, finding financing for a multiunit home can be more difficult, so fewer buyers will qualify. And quite frankly, there are less people willing to buy duplexes compared to people looking for single family homes. Finding a buyer is certainly not impossible, but it could take longer.

Click here to read Part 2: Finding the Right Loan for Your Multiunit Property

If you have decided that buying a multiunit property is right for you, congratulations! You’re giving yourself and your family an opportunity for financial independence and stability, so to get started, check our blog for Part 2 of this series!

If you have further questions, contact the team at San Diego Purchase Loans today. We’d love to discuss the benefits and drawbacks of owning a multiunit property!

Testimonials

“Hi Juliann and Chad, I wanted to take a moment and thank you guys for what would have been impossible for us to do without you. We wouldn’t have our keys in hand if it had not been for your help in navigating the financing, and Juliann’s perseverance in getting the rest of the players in the transaction to deliver. Out of everything, our interaction with your office has been a highlight – and your customer service has been beyond everything we’ve experienced in the real estate industry. Is there a way we can provide any reviews, ratings, testimonials, or other statements that can express to your potential future customers how much you guys do to make the customer’s life easy? Please let us know how we can share our great experience with you to the rest of the public. Whether we refinance this under a VA, or get in a bigger/better house in a few years, we’re not going to go anywhere else for financing. We are customers of yours as long as you are in business. Thanks again for getting us in a house!”

“This is the second time that I have worked with Chad (home purchase & refinance). He has become my subject matter expert and someone I depend on for all finance needs related to our home and real estate investments. My favorite things about Chad are his depth of knowledge, responsiveness, honesty and the great service he provides. I have referred countless friends and family of mine to work with him for no other reason than I know that he will treat them well and equip them for the best possible outcome. Chad will add tremendous value to any real estate transaction that you have and I am grateful to have him as a resource.”

A very responsible and experienced professional with his highly effective team

I really enjoyed working with Chad Baker and the rest of the team. This was our first time buying a home in California and we started with unnecessary assumptions based on our previous experience as home-owners in a different state. Chad and his team were available throughout the whole process, explaining the state differences, answering all our phone calls and emails quickly and directly, and providing detailed weekly status reports so that all parties including agents knew exactly where we were in the process. Chad was very experienced and provided customized loan products for us to consider, which definitely facilitated our transaction. I recommend the Chad Baker team! ”

“Chad, it was a pleasure working with you. Your loan was smooth, speedy, and we were kept well informed. I will make sure to prioritize offers where you are the loan officer as I know they run smoothly.”

“Hey Chad, Just wanted to send a quick note to Thank You for all your work and effort to get this escrow closed. It was a pleasure to work with someone as professional as yourself. If I have a client that ever needs a lender you will definitely be someone that I  would recommend.”

I was amazed how quickly Chad was able to knocked out our refinance!
I highly recommend Chad he & his team did an incredible job! I had 3 others I was working with, including a Credit Union. Chad was able to offer me a lower rate with no fees! Based on the other 3 top financial bids I had for this refinance. ”

“I wanted to reach out and tell you both Thank You for working so hard on my loan. I really appreciate how much effort you both put in to make it happen! Top notch, one of the best I have ever seen in the business.”

Great Job Chad Baker Team & Homepoint!
I was very impressed with the professionalism and quick response times from Chad Baker & his team during the entire process. I would highly recommend Home Point for mortgage needs. Great Job! ”

“Chad Baker is THE BEST, most professional, understanding, HONEST person I’ve ever worked in the mortgage industry. He knows exactly what he’s talking about, will never promise something he can’t deliver, and will bend over backwards to get you what you need. I had a very unique problem qualifying and every other mortgage company I worked with assured me from the beginning that they could get me financed, and then it would all fall apart once we hit underwriting. Chad understood my circumstance from the beginning and patiently explained every step of the way. I can’t thank you enough Chad! Juliann has been great keeping me updated and making sure that everything comes together in a timely fashion. She also appreciates my sense of humor, which gives personality to a boring funding process. Thanks Juliann! I HIGHLY recommend Home Point and if I ever buy another home, will absolutely use them again.”

I was amazed how quickly Chad was able to knocked out our refinance!. I highly recommend Chad he & his team did an incredible job! I had 3 others I was working with, including a Credit Union. Chad was able to offer me a lower rate with no fees! Based on the other 3 top financial bids I had for this refinance. ”

When looking for a house, we had couple recommendations for a lender. After talking with all the lenders, many were difficult to work with and couldn’t get it done as quickly as we needed. I was referred to Chad Baker’s team and I am glad we did. Not only did they get the things done quickly for us, they were very easily to get ahold of. It wasn’t rare to get a response within 15 minutes whenever an email was sent. I could not express how friendly and outgoing this team is. And on top of that, they came back with the best offer for us amongst all the other brokers. I am glad I worked with these guys. If you are looking for a lender…MAKE SURE TO CALL CHAD BAKER AND TEAM!!! Thanks Chad for all your hard work. Next time we buy another house I am calling you first!

As a first time home buyer, I wasn’t sure what to really expect, but Chad and his team made the process very clear and easy. Once the process was over, they didn’t just vanish either. They kept in touch and looked for opportunities that may benefit me. A couple years later, they found me a great refinance opportunity that saved me a lot of money! Once again, the process is long and grueling, but Chad and his team made it as painless as could be. Any barrier that I encountered, they found a quick solution to make it happen. Mortgages are a huge commitment and I wouldn’t pick any other team to help me make the right decisions.”

Excellent service!. Recently purchased a property in Northern San Diego County. Chad and his team were recommended to me to check out. The rate he acquired was a full point & a half better than the Broker I have been using for years. His team was exceptional and did great follow through. Definitely 5 star service!”

An ‘A’ Team!
We just closed on our second transaction with the Chad Baker team. They are very well organized and I can attest that they are looking out for their clients’ best needs. A special shout-out for Juliann B. who was our guide through the painful loan process. We found Juliann to be very responsive, kind, patient, and diligent in getting both our refis closed well.”

Excellent service!
My wife and I purchased a home in Escondido, first home together. Chad and his team made the whole process extremely easy and helped us close quickly. Will recommend to all friends and family!”

Chad Baker and his team are amazing!

My husband and I found Chad through an article he had written. Every aspect of working with Chad and his team was exceptional. From our initial phone call where he explained the many options we had, to advice he gave in dealing with somewhat challenging sellers, and closing our loan ahead of schedule, the loan process with Chad and his team went very smoothly. I especially appreciated the one-on one guidance from Juliann, who really made me feel like I was her only client. I look forward to working with Chad and his team again and would highly recommend them to anyone looking for a mortgage.

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

“Good experience

I recommend chad because he is not pushy or trying to manipulate as others in the same business, the process was smooth with no obstacles, best team. ”

I HIGHLY recommend Chad and his team.

Chad and The Chad Baker team really helped me from start to finish with my loan process. They were extremely responsive and provided me updates on a daily basis. I had a few personal issues that they helped me work through so I could get the best loan program and best rate. Very knowledgeable about the industry, rates and trends.I HIGHLY recommend Chad and his team. I’m happy to offer a reference upon request. Please ask Chad for my contact information.”

Everything about our transaction with this lender was perfectly explained to us, easy to do, and they were able to help us get our loan closed ahead of schedule. It was a perfect 10 and we couldn’t have been happier with the whole thing

Chad was very personable. His staff was very suportive.
I had the pleasure of working with Chads team. Everything went as planned. I was very pleased. I still want to take them to dinner. I am completely enjoying my new home”

Chad and his team are fantastic!

Chad and his team assisted me with the financing of my condo. Every member of Chad’s team was extremely professional, highly competent, super responsive, and friendly. They realize that financing a home can be a stressful experience and they do their best to alleviate that stress by keeping you in the loop on everything. They were great about giving me frequent updates on the status of my application. In addition, they happily answered my questions. At one point, when I felt like I was pestering Chad with questions, his response was a friendly, “keep them coming!” And he meant it!!! Likewise, Maria and Karina were just a pleasure to work with as well! This team is like a fine-tuned machine. Thank you so much for all of your help!!!

I highly recommend Chad Baker. He does a phenomenal job and won’t trauma you or your clients. He has a whole team that works on the loans. And all the team members are great. He has a person that can translate for your clients that are Chinese. He is as good of a loan officer as you are an agent, and that is what you want when referring clients to a lender.

“Chad, Juliann and the team were great in helping me get through this process. It is not an easy process but they stayed with me the entire time and I am truly grateful. ”

“Chad and his entire team were over the top amazing, professional, and attentive throughout the entire home loan/buying process. I could not have asked for a better team to have on my side through what could be one of the most challenging and stressful processes one experiences. From the first conversation I had with Chad, I felt comfortable with him. He helped guide us through the process without ever once making us feel uneasy, unimportant, or uninformed. I never felt silly or stupid for asking the same questions over and over until I fully understood what we were getting into, or until something made total sense to me. The home loan world is fast paced, overwhelming, and confusing, and Chad and his team held our hands and helped us to feel comfortable and confident about our choices. He and his team were always there for us day or evenings, weekdays, or weekend and never made you feel like you were a bother if you had a burning question you had to get answered at 8pm Saturday night. I will use them again and again, and suggest them to any friend, family, or acquaintance. Seriously, they are rock stars. They work hard for you to get you into your dream home, we could not be happier with their hard work, dedication, and kindness.”

highly recommend Chad and his team. They were always available for any questions, concerns etc. we had. The process to close the loan went super fast. Chad and his team always went above and beyond. The customer service was the best! I will definitely recommend to all Thank you again for everything!

“Chad and his team are exactly who you want handling the financing of your home. Whether it be a new purchase or refinance, he and his team are one of the most professional, responsive group of people I’ve worked with. Buying a home can be very stressful and Chad and his team took all of the necessary steps to make the process as painless and as quick as possible. They are extremely knowledgeable, organized and have great follow through. You won’t ever be left wondering what the next steps are. I highly recommend him and will use him in all of our real estate transactions moving forward.”

“We’re loving our new place and we’re very pleased with how smoothly everything went through closing. Thanks for keeping us up to date on the possibility of refinancing at a lower rate; we trust your judgement as far as waiting until the rate is around 5% lower before we refinance. We’re very interested in pursuing that if rates drop to that level. Thanks so much for all your help and personal attention!”

“Chad and The Chad Baker team really helped me from start to finish with my loan process. They were extremely responsive and provided me updates on a daily basis. I had a few personal issues that they helped me work through so I could get the best loan program and best rate. Very knowledgeable about the industry, rates and trends. I HIGHLY recommend Chad and his team. I’m happy to offer a reference upon request. Please ask Chad for my contact information.”

“Chad and his team were fantastic. They were incredibly responsive to us and our needs. Chad laid out several refinance options for us, and was very supportive when we decided on the option we felt was best for our family. Chad and his team worked our deal and got our mortgage funded incredibly fast, with excellent service and even took the time to thank us personally once we funded. I can’t recommend Chad enough!”

“We signed all our papers yesterday afternoon. I wanted to thank each one of you for all your hard work and tenacity in making this happen for Michelle and I. This is by far the easiest closing we have been through. All thanks to you all. You all the best at what you do. No other group works like this together. Again, thank you all, from Michelle and I, we will be forever grateful. Absolutely the best team I have ever dealt with. From beginning to end, the customer service provided was beyond reproach. Everyone gave us their personal attention and that made it so easy.”

“Thank you for all the hard work (even on weekends!) you and your team have devoted to seeing this through in a very efficient manner. It’s been an easy process for me and, you and your team have been a delight to work with.”

Awesome Team

Chad and his team was awesome throughout the entire process. They made things easy and smooth, and able to answer any questions at anytime. By far the best experience with a lending team yet. Great job!”

EXCEPTIONAL, SUPER EXCEPTIONAL! The most professional, accountable and committed mortgage service we have ever worked with. With numerous experiences in buying and refinancing homes, by far Chad Baker and his team remain at the top of our list. We feel very blessed to have located such a committed company who serve their clients with an exceptional first “first class” mindset.

Thank you Chad and Team

Chad and his team have been a pleasure to work with. I’m a 3rd time home owner. Wish I had known Chad and team a lot sooner. He made my 3rd home purchase very easy. There were a lot of moving pieces and they handled with professionalism and care. Juliann was a pleasure to work with too. The whole team made it possible for us to move into our dream home. Thanks you Chad and Team!

Thank you, Chad. You have been amazingly responsive to all my questions, and you have a great staff assisting you. Thanks so much for all your help!

“Chad – Your team has been nothing short of amazing. Juliann has aggressively followed-up with escrow and gone out of her way to make sure things get done on schedule. Matt and I can’t express to you enough how much we’ve appreciated all of your counsel at the beginning of the process and her execution to see it through to close. As always, appreciate everything that you guys have done to see this through.”

Outstanding experience

I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.

“Hey Chad – thank you so much to you in particular as well as your team. It’s been a real pleasure working with someone who’s as responsive and helpful throughout the process, as you’ve been. We really appreciate what you’ve done. ”

“Juliann – Thank you very much for your patience and help with everything. I can say 150% that we could not have gotten through this without you. I have been through this process before a few times BUT never have received this type of care/attention. This process is intense and you managed to humanize this life changing experience for us – rather than being a loan number. If you or Home Point ever need an official recommendation from us, you can count us in.”