It should come as no surprise to most real estate investors that owning an investment property can be a pricey endeavor. While it’s smart to recoup the cost of acquiring and financing the property by either reselling or renting it out, it’s even smarter to find additional ways to maximize its earning potential. Investing in owner occupied properties is great way to do so—and here’s why.
As an investor, the possibility of occupying the same property as your renters may not have crossed your mind. The benefits of doing so, however, are important to take into consideration. For example, investors in owner occupied properties may have the ability to write off associated rental expenses. This means that if a major problem occurs that impacts all units in the property, including yours, you may have the ability to write a percentage of the total repair cost off your taxes. On the other hand, if you lived in a separate owner occupied home with no renters, you would receive no tax benefits for any repairs needing to be done.
Another benefit to investing in owner occupied properties is that landlords who live on-site tend to select higher quality tenants. This has to do with the desire to be more selective about the people they choose to share the building with. After all, the last thing you want is to share a building with noisy and disrespectful tenants. Also, potential tenants who know that their landlord is next door are far more likely to adhere to the rules and requirements of their lease—those with a landlord who lives far away may not.
Investors who occupy their properties also save money by not having to hire property managers who would normally maintain things in the owner’s absence. Since you would occupy a unit on the premises, you’ll be aware of any maintenance concerns and have the ability to handle them yourself. While this may be a bit of an inconvenience, the money you’ll save by taking on this responsibility is certainly nothing to sneeze at.
When it comes to investing in owner occupied properties, don’t forget about depreciation. Owning a home that you occupy without renters offers no tax benefits for depreciation. Owning a property that you occupy with renters gives you the opportunity to write off any depreciation occurring on parts of the building occupied by tenants. This bonus, along with the several other benefits discussed above, should make investing in owner occupied properties a smart option for any real estate investor.