Four Financial Advantages Of Buying And Renting Out A Two-Family Home

23 June 2015
 Categories: Real Estate, Blog


Following the housing crisis of 2008, many young families have hesitated to enter the real estate market, fearing that any substantial investment could result in financial hardship later on. Many enterprising young individuals, however, have found a way to both own their own home while minimizing the risk. Purchasing a two-family house as your first home can be an exciting and rewarding prospect, and it offers several benefits over the traditional single-family home. 

Improving Your Loan Terms

Renting out the second unit of a two-family home can be included as planned income on your mortgage application so long as you are reasonable about your future profits. This can give borderline applicants the push they need for loan acceptance, or it can be used to negotiate a better interest rate on the mortgage. Federal regulations also promote multi-family homes by raising the price limit that determines whether or not a home qualifies for a lower-rate conforming mortgage.

Reducing Your Mortgage Payment

The most obvious benefit of renting out part of your home is that you can use that rent to offset your monthly mortgage payment. In some cases, the money you collect can meet or even exceed your mortgage, though most landlords are simply happy to have extra spending money every month. When budgeting your rental income, don't forget to factor in expenses such as vacancy, repairs, and general maintenance to get an accurate picture of your future finances.  

Taking Advantage of Tax Incentives

Buying a two-family house as your first home also carries some tax advantages. Repairs and other costs associated with your rental unit are often tax-deductible, including half of your shared expenses. Furthermore, annual depreciation write-offs can offset thousands of dollars in taxes every year. Filing taxes with investment real estate can be more complicated, and you may need to consult with a tax professional to ensure that you have accounted for every regulation and possible deduction. 

Building Capital for Future Investments 

Many families shy away from committing to a home because they worry that they will end up moving to a different house within a few years and lose money in the process. Owners of a two-family home, on the other hand, can use the money they collect and save to eventually fund a down payment on a larger house, while still retaining two rental units and the profit they generate. This provides you with a solid financial foundation to support your family and even branch out into additional properties to start a small business of your own.

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