The Pros and Cons of Owner-occupied and Non-owner occupied Rentals
Owner – occupied rental or non owner occupied rental? Investing in real estate has a range of great benefits. It is, classically, an investment. Along with text benefits and (hopefully) the property value steadily increasing, the idea of investing in a property has a wide appeal.
Before doing so, it’s worth considering some pros and cons, whether you’re going to live in the property and rent it out too, or if you’re investing in a non owner-occupied rental property.
Below are pros and cons for both situations;
Owner occupied plus rental property
Let’s start with properties you both occupy and rent. Well, the big plus is that you’ll get to know your tenants. This is invaluable as the owner of a property. Knowing your tenants well means it’s more likely they will respect your property entirely and pay their rent on time. If you’ve got a good relationship with your tenants, they’ll be more likely to recommend you as a landlord when they move on, meaning you’ll garner a good reputation as a landlord through word of mouth. Further, when the tenants eventually move out, it’s easier to raise the price of rent to new occupants.
However, that’s both a blessing and a curse – tenants can stay for indeterminate periods of time. You might want to raise the rent, but that’s a hard conversation to have with people you live with. Living with your tenants isn’t all plain sailing. It’s a sad fact that people care less about property that doesn’t belong to them. Your property is a project to you, something you cherish. To your tenants, it’s ephemeral. This difference of mindsets about the property might complicate your living situation significantly. Another problem you’ll find yourself facing if you opt to live amongst your tenants, is the turnover involved when new tenants eventually move in. Renters come and go, and this nearly always involves some kind of fix up fee.
Non owner occupied rental property
One major benefit for renting your property without living in it is the deduction you’ll get for the upkeep – a big plus. Another positive about simply renting the property – and not occupying it – is you won’t have to worry about any possible clashing timetables; tenants might stay up late, have certain habits you find disagreeable, or simply foster an unfriendly home environment. Though, they’re not bad people because of this – people are different, but ideally, you’ll want to avoid people with drastically different living habits compared to you. So, not living with your tenants in a rented property can get rid of this potentially chaotic element.
As we mentioned earlier, tenants tend to care less about the property than the owner. Yes, you can take sizable deposits from tenants, but it won’t necessarily deter them from damaging the property. You’re meticulous when it’s your property – tenants aren’t; they might unknowingly do a great deal of damage to your property. Being away from the property might not be the best idea, since tenants can be unpredictable.