Six Things To Consider Before Buying A Two-Family House
Thursday Dec 12th, 2019
It’s not an exaggeration to state that everyone wants to own a home but financial constraints restrict many to avail the option. A significant number are now opting for a two-family house or duplex to defray the costs of buying a home and cover the mortgage. By solely taking finances into account, it is surely a great idea, but before availing it one should be aware of the impact it may have on privacy and other life choices.
01 – Location
It’s important to know that multi-housing options are limited as a significant number of neighborhoods aren’t open to the idea. One may find the market of it in the urban areas however sub-urban areas prefer to house single-family homes. Apart from that, as a landlord, one must also consider the accessibility of location – whether it's accessible for the potential tenants or not. For instance, buying a home in a less desirable area of town will make it harder to find good tenants. Ontario is an ideal location for multi-family housing – if you have no idea about Ontario's real estate, you better hire an agent to make the right decisions in residential property investment.
02 – Privacy
Going into a two-family house may sound a bit fancy but always be ready to face time-to-time privacy issues. Irrespective of the fact wherever you live – whether downstairs or upstairs – tenants are expected to stop by at any time for problems and questions related to their home. As a landlord one should ensure that everything is in working order for the tenants. And one should always be ready for little comprises of privacy.
03 – Financing
Financing may seem easier with a two-family home, but in reality it's actually not. The potential rental income may help you qualify for the purchase, but you need to have a low debt to income ratio, good credit, and more substantial down payment. In case, a tenant moves out then you need to pay the full mortgage yourself until you find a new tenant. Therefore, banks want to make sure that you can pay the mortgage even without having a tenant in hand.
04 – Rent Collection
Rent collection is not always a smooth ride. There are instances when the tenants don’t pay their monthly dues on time or in the worst-case scenario failed to pay it at all. Consequently, their nonpayment or late payment would adversely affect cash flow and mortgage. Hence, safe to say that being dependent on rental income to cover mandatory expenditures is a risky business. Furthermore, evicting a tenant for nonpayment takes months and may require legal help.
05 – Selling the Property
Selling a single-family home is far easier than a multi-family house. There are multiple reasons for it. First of all, as there is a small market for double-family homes, it becomes difficult for the landlords to sell it. Secondly, things can get a bit complicated by having tenants occupying one of the sides of the home. Legally, tenants reserve certain rights – which can’t be ignored. Whether a potential buyer tends to live in the house or not, they will want the information of the tenant's lease agreement. For example, what's included in the rent, whether a security deposit is involved, and more.
All in all, it's best to sell a two-family house when no tenants are occupying the space.
06 – Vacancy Expense
Vacancy expense arises when a tenant moves out resulting in the shrinkage of the rental income. Most likely, a landlord would need to pay for the repairs and painting costs to fix the house for the new tenant. Not only that, one needs to pay for advertising to attract potential renters.
The Bottom Line
Undoubtedly, buying a multi-family property can be a great way to own a house and pay the mortgage. But be sure to deal with all the issues that will come your way after renting one or the other side of your property. Whether you are looking for a piece of professional advice about buying a two-family property or taking a loan, DanieleSica.com is the best real estate provider. Reach out to us anytime for all kinds of real estate advisories.