One of the best ways to get a start in real estate investing is to invest in a small two-family or three-family home and occupy one of the units. “I live rent-free,” says one such investor, “and in a few years, I will move into the kind of single-family home I want and rent out the unit I am now occupying.”

This is a sound strategy that smart investors have been using for years. Here are some of the reasons why it is worth considering . . .

  • Banks and other mortgage lenders will factor in rents and the cash-generating potential of multi-family homes as they calculate the amount of the loan that they will issue to you. The result? You can qualify for a larger loan and buy a more valuable property for the same amount of money down.
  • Multi-use properties that have stores on the ground floor and apartment units above can generate even more income. The result could be significant positive cash flow as well as rent-free living for you. Just be sure to investigate the cost of liability insurance on such properties, which typically costs more than a simple homeowner’s policy.
  • Drawbacks are few, but worth thinking about. One can be living in close contact with tenants who might be knocking on your door at all hours to report a leaky pipe. Another is the necessity of investigating tenants who are already living in the building before you buy it. After all, you need to be sure that they are reliable, solid renters.  If those considerations do not scare you off, a multi-unit home that you occupy could be a great first investing choice for you.

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