These days, there are many ways to invest in rental property. Especially depending upon the region of the country. Buying a home can be full of difficult decisions. As housing prices climb, maybe even more difficult financial planning is needed. People are looking for a different way to help pay for their mortgage every month. Some are choosing a home with an attached rental unit. This might just provide the monthly bump that makes that payment a little easier to accomplish.
Invest in Rental Property – What Is an Additional Dwelling Unit?
What is becoming more common in expensive regions are Additional Dwelling Units (ADUs). These typically a smaller living space adjacent to a main home. It might be a tiny house in the backyard, or something more like self-contained mother-in-law quarters attached to the house. It can even be a small apartment over the garage. There aren’t a lot of rules about what an ADU has to be, except that it should be fully autonomous.
The reason for autonomy is that this is what it takes to really have solid rental income potential. Imagine if you were renting an apartment somewhere, you’d certainly want to have your own kitchen and bathroom, wouldn’t you? It’s difficult to rent units without these features, so typically, they’re part of any successful ADU.
Related: Find Your Real Estate Strategy
Benefits to Having an ADU
Having a rental can be a lot of work. However, there are also a lot of benefits to having an ADU on your lot. First, the rent from an ADU help pay the mortgage every month. Then, it can also act as flexible space for whatever life might throw at you down the way.
When you first buy your home, maybe you really need help with the mortgage payment. Therefore, use the ADU as a long-term rental unit with a tenant who has signed a year-long lease. This tenant not only pays the utilities for that unit, but they also help out with the mortgage by paying rent. It’s a great situation while you’re trying to pay down your mortgage and ramp up your income. In fact, if you make 1 extra mortgage payment per year, you may save 5 to 10 years off of your mortgage.
If you get tired of dealing with a long-term tenant, but you can still use that unit for short-term tenancy. Depending on your neighborhood and city. Airbnb, for example, gives you the option to rent by the day or week. You can turn off being a landlord for a few weeks and go on vacation yourself without having to worry. Just check your HOA and ordinances first.
If AirBnB isn’t your thing, your ADU can still be used by your college-aged child or aging family member. Remember, these are essentially self-contained apartments, so they should provide a great deal of privacy and autonomy to anyone living inside. ADUs have long been favored by people with aging parents, hence the former popular nickname “mother-in-law quarters.”
Invest In Rental Property – Other Types
While ADUs are becoming popular, there are also other options. You can have a duplex, triplex, or fourplex. These are buildings where you live in one unit and rent the rest out. It can make far more sense to own a fourplex instead of 4 separate houses.
Related: Why Own Rental Property
Financing a Home With a Rental Unit
If you’re looking for a house with a rental unit, you may also wonder how you’re going to finance it. Do you need a special kind of loan or is this edging into the realm of commercial financing? Not at all. Most mortgages will allow you to purchase a property that has up to four units on it. That’s a lot to handle if you’ve never had a rental, but a single ADU is pretty easy upkeep.
All you need to do is choose a property that you like and ensure that it will pass any requirements from your lender (your Realtor can help with this). Certain programs may have specific inspections, such as FHA, VA, or USDA, so you definitely want to let your lender know that you’re looking for a property with an ADU before you commit to your loan.
Related: 5 Questions to Ask Before You Sell a Home in Las Vegas
The First Step
When looking at rental property, there is an important first step. The first step is to look at what you want to accomplish. Then to look at the time frame that you want to accomplish it. For instance, you want to generate $50,000 passive income each month in 20 years. Then you need to consult with your accountant and your attorneys. They will guide you on how to protect your assets. Then make sure your real estate agent understands the full vision and not just what you want to buy or sell today. I am always happy to meet with yu and help look at creating your plan together.
For more information, EMAIL ME
And see my latest information at:
CLICK HERE to see what your home is worth
CLICK HERE to search for Las Vegas area homes