Owner Occupied Property Benefits You Should Know

Many people choose to grow their residential property portfolio by acquiring new homes and converting their old residences into one to four unit apartments. Choosing to build your portfolio through owner occupied properties is an income generating strategy that can supplement other acquisition strategies while building your assets, all helping you to achieve more favorable financing terms from lenders. There are three popular advantages to this investment approach.

Beneficial Financing Terms

Owner-occupied financing terms are often better than those for traditional commercial real estate investments. Lower interest rates add up to considerable savings over the life of your mortgage, especially if you use loans repeatedly as part of your investment strategy. One or two percentage points of interest savings could keep thousands of dollars in your pockets over the lifetime of your portfolio.

Loans for owner occupied properties also often require a much smaller down payment than for other real estate ventures. This reduced down payment allows you to keep more cash in your pocket and the liquidity to make renovations on your properties if necessary, or make a larger down payment than the minimum required to help you negotiate better terms.

Maximize Return on Investment

The financing terms associated with owner-occupied lending allow borrowers to maximize the returns on their investments. Not paying rent means any money spent will be a direct investment in your own assets, rather than someone else’s. Lower interest rates and down payments mean lower overall costs and an easier loan to repay, with income generated from your property becoming an asset sooner. Your cash flow and your return on investment can both be maximized with this strategy.

Avoid Financed Property Limits

Expanding your portfolio by converting your homes into rental properties helps you avoid financed property limits that other investors face. Federal limits for financed property limits are capped at ten properties. This number of finances may be difficult for investors to reach; many banks will not finance the purchase of more than five properties if you are taking out a traditional bank loan to purchase an investment property. The rules about financed properties do not apply to owner occupied buildings, however, allowing investors to avoid those limits.

While moving frequently can be difficult, the additional income generated by rental properties offsets these challenges for many people. This investment method has many benefits beyond those listed above, and can be used to establish multiple long-term sources of income. Check with a mortgage professional for guidelines and qualifying information if you are considering investing in owner occupied properties.

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