Buying a multigenerational home as a rental: bad idea?

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jastevenson
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Joined: Mon Nov 26, 2012 11:32 pm

Buying a multigenerational home as a rental: bad idea?

Post by jastevenson »

Hi all,

I have the opportunity to purchase a multigenerational home at an attractive price (a single family home with an attached mother-in-law unit with its own separate entry; living spaces do not share a wall).

Any thoughts on whether this would make a decent rental property? It's a 4/3.5 (3/2.5 in main house, 1/1 mother-in-law unit), and the price is close to that of a standard 4/3. Main question is whether there is demand to rent this sort of house.

Thanks!
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leeks
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Re: Buying a multigenerational home as a rental: bad idea?

Post by leeks »

Are you going to live in one of the units?

Would you be allowed to rent each unit separately (different leases to unrelated people)?

If you could only rent the entire property as one lease, yes I think there is demand out there but it is uncommon to rent that way and probably only a small segment of potential renters are seeking this. So I would expect longer-than-usual vacant time between tenants to find family seeking this setup. I don't think you could get as much money as if you could have two separate leases.
terran
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Re: Buying a multigenerational home as a rental: bad idea?

Post by terran »

I'm not an expert at all, but if you're renting the units separately then I suspect the larger unit will rent for less than a similarly sized single family home (since such renters would probably prefer not to have co-tenants), the smaller unit will probably rent for a similar amount or a bit more than other similarly sized units (since such renters would expect to have co-tenants and might prefer only having one co-tenant instead of being in a larger building), and together they'll probably rent for more than a single 4/3.5 (since rent on the 1/1 can only go so low), but you'll have more hassle since you'll have two tenants and you might have a little more trouble renting the larger unit.

If you're planning to rent the units together then I expect you could easily rent it for the price of a 3/2.5 because most people might not get much value from the mother-in-law suite, and you could maybe get more than a normal 4/3.5 with the right tenant because it could be very attractive to the right person, but that person is probably pretty rare, so it might be hard to find them. If you were open to a tenant running an AirBNB on the property you might increase the number of people who would find such a property useful. Again, not an expert, so this is more based on my guesses of human nature and my experience being a renter.

Make sure the mother in law unit is legal and preferably is on its own utilities, especially if you plan to rent it separately.
rascott
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Re: Buying a multigenerational home as a rental: bad idea?

Post by rascott »

My guess is this something that will take longer to rent up the right tenant.... but once you find one, they are likely to stay long term. As this would be a very difficult property to find as a tenant, looking for something like this.

I kind of like specialized properties like these as rentals, as you should be able to charge a premium, assuming you market it correctly.

The demamd for multi-generational housing is bound to increase with increasing longevity and ever rising housing prices
TropikThunder
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Re: Buying a multigenerational home as a rental: bad idea?

Post by TropikThunder »

Sounds like a good AirBnB property.
mikejuss
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Re: Buying a multigenerational home as a rental: bad idea?

Post by mikejuss »

Where is it located and how much does it cost? Those factors will determine whether it's desirable as a rental.
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MikeZ
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Re: Buying a multigenerational home as a rental: bad idea?

Post by MikeZ »

I would take a hard look at the numbers. I used to own a 5 bedroom home and when I was deciding whether to sell or rent the math always showed that a standard 3/2 makes a better rental.
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Sandtrap
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Re: Buying a multigenerational home as a rental: bad idea?

Post by Sandtrap »

jastevenson wrote: Tue Jun 15, 2021 7:18 pm Hi all,

I have the opportunity to purchase a multigenerational home at an attractive price (a single family home with an attached mother-in-law unit with its own separate entry; living spaces do not share a wall).

Any thoughts on whether this would make a decent rental property? It's a 4/3.5 (3/2.5 in main house, 1/1 mother-in-law unit), and the price is close to that of a standard 4/3. Main question is whether there is demand to rent this sort of house.

Thanks!
For possible purchase and rent.
SFH
3 bedroom / 2.5 bath
1 bedroom / 1 bath detached (permitted?)

Factors unknown in your missive: (and unique to "your purchase and area" vs "anyone else or anywhere else".

1. Comparable rental units in the neighborhood or the area without the extra detached dwelling?
2. Comparable rental units in the neighborhood or area, with the unit?
3. Available rental units in the neighborhood vs owner occupants?
4. Available clientele. . . rental market in the area for SFH's, multi unit apartments, townhouses, condo's, etc?
5. Purchase price, mortgage debt, potential realistic income, CAP, and ROI? (business plan. . .do you have one?)
6. Property management company or self managed?
7. Are there other homes in the neighborhood with similar additions and detached units?

7. ** Investment Finance focus per forum guidelines:

a) Is purchasing the SFH and renting it out part of your long term personal finance investment and retirement strategy?
b) Do you have other rental units or plan to expand more rental units from this purchase? (does it fit per (a) above?

Also Actionably:
A. Whether the SFH is with or without an accessory dwelling unit, or otherwise, is less relevant than the above.

PM me as you wish.
j :D

(dislaimer)
Input on the above varies depending on each person's experience and knowledge and so forth.
Wiki Bogleheads Wiki: Everything You Need to Know
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midareff
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Re: Buying a multigenerational home as a rental: bad idea?

Post by midareff »

Sandtrap wrote: Wed Jun 16, 2021 11:39 am
jastevenson wrote: Tue Jun 15, 2021 7:18 pm Hi all,

I have the opportunity to purchase a multigenerational home at an attractive price (a single family home with an attached mother-in-law unit with its own separate entry; living spaces do not share a wall).

Any thoughts on whether this would make a decent rental property? It's a 4/3.5 (3/2.5 in main house, 1/1 mother-in-law unit), and the price is close to that of a standard 4/3. Main question is whether there is demand to rent this sort of house.

Thanks!
For possible purchase and rent.
SFH
3 bedroom / 2.5 bath
1 bedroom / 1 bath detached (permitted?)

Factors unknown in your missive: (and unique to "your purchase and area" vs "anyone else or anywhere else".

1. Comparable rental units in the neighborhood or the area without the extra detached dwelling?
2. Comparable rental units in the neighborhood or area, with the unit?
3. Available rental units in the neighborhood vs owner occupants?
4. Available clientele. . . rental market in the area for SFH's, multi unit apartments, townhouses, condo's, etc?
5. Purchase price, mortgage debt, potential realistic income, CAP, and ROI? (business plan. . .do you have one?)
6. Property management company or self managed?
7. Are there other homes in the neighborhood with similar additions and detached units?

7. ** Investment Finance focus per forum guidelines:

a) Is purchasing the SFH and renting it out part of your long term personal finance investment and retirement strategy?
b) Do you have other rental units or plan to expand more rental units from this purchase? (does it fit per (a) above?

Also Actionably:
A. Whether the SFH is with or without an accessory dwelling unit, or otherwise, is less relevant than the above.

PM me as you wish.
j :D

(dislaimer)
Input on the above varies depending on each person's experience and knowledge and so forth.
The 1/1 would make a perfect place for your girlfriend if your wife didn't want her in the main house with both you..
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Sandtrap
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Location: Hawaii No Ka Oi - white sandy beaches, N. Arizona 1 mile high.

Re: Buying a multigenerational home as a rental: bad idea?

Post by Sandtrap »

Yes.
There’s never a way to really predict a future long term tenant because it depends on their unique needs, finances, and how the entirety of things fits in one’s “financial planning”.

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know
IMO
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Re: Buying a multigenerational home as a rental: bad idea?

Post by IMO »

It all really depends on the numbers.

Have you looked at things like depreciation/depreciation claw-backs, insurance/liability, zoning, viable parking situations, etc. Are you okay with the current federal policies that have provided protection for renters to potentially forgoing they pay you rent, especially if something similar happens in the future? Are you familiar with how evictions are handled?

Do you want to always have a tenant and their guests that can feel somewhat as a limitation on personal privacy? What if they bring over someone that you feel is questionable around one's children living in the main home (sorry you can't just tell them "I don't like your boyfriend, please don't bring him over.")

Do you want to be a landlord?

It can work out fine, but just be aware that it can be more complicated than you anticipate.
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