Acquiring single-family homes to use as rental property is a great long-term investment strategy. But when you're first starting out, how do you come up with the money to purchase your first property when you have few financial resources? One of the best ways is through the owner-occupied model. Here are some ways to use this model to begin building your investment property portfolio.
About the Owner-Occupied Investment Model
This method of purchasing rental properties means buying a single-family home as the primary resident, holding it for a period of time, then, when you're ready to trade up, turning it into a rental. Because you are buying it as your primary residence, you get the best mortgage interest rate and likely a smaller down payment. You pay down the mortgage for a few years while saving for your next property down payment.
Treat Your Home Like an Investment
To make the most of this model, you need to treat your home like an investment from the beginning. You know that in a few years you will be renting out the property, so when you purchase the home, make sure it is in a good location that will appeal to renters. Is it in a nice neighborhood near amenities such as public transportation, shopping centers, parks and quality schools? With any improvements or remodeling you do, keep your future tenants in mind. Opt for durability over luxury when replacing kitchen floors, wall coverings or fixtures. Don't buy top-end stainless steel appliances. Go for mid-range instead, and energy saving units are a big plus for both you and your renters.
Similar Forms of the Owner-Occupied Model
If you already own a home, you can start being a landlord now. Consider renting out 1 or 2 rooms in your house while you still live there. Have them sign a formal lease. Not only will the extra income help you save for another down payment, the rental income can work for you when you try to qualify for your next property purchase.
Another way to leverage this model, especially if you're interested in getting into multi-family rental property, is to purchase a duplex and live in one unit while renting out the other. When it's time to move out, you'll have two income streams so you're less vulnerable to vacancies. You can also do this with a 3- or 4-unit property if you have the financial resources.
Build a Relationship with Your Real Estate Agent
The owner-occupied model is an excellent way to get started in real estate investing, and having a reliable real estate agent is invaluable. Not only will he or she help you find suitable homes, they typically have relationships with certain lenders and can recommend and help you work with them. They may also help you find suitable tenants when it's time for you to move out and move on to your next property. The relationship with your agent is a partnership, which, if it works well, will grow into a long-term relationship that is beneficial for both of you.
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