Yes, it is possible to live rent-free in a multi-family. Not all multi-families are created equal. If living rent-free is your goal, you must select the right property with the help of an experienced multi-family real estate agent. In this article, we’ll run through a possible scenario and highlight the key property features needed.

1 – Multiple Units

Typically, living rent-free requires a multi-family property with at least 3 units. Rent from two units can cover the expenses for the property, leaving the third unit available for you to occupy as an owner, rent-free. It’s rare, although not impossible, to find a two family property where just one unit’s rental income is high enough to cover mortgage exenses.

2 – Low Operating Expenses

Another key component are the operating expenses for the property. It’s important to select a home in an area with moderate to high rents and low operating expenses. Added costs such as flood insurance or maintenance can make it difficult to generate enough profit from just two units. As you view listings on our website, use cash-on-cash return and cap rate to evaluate operating expenses and profitability relative to the cost and financing of a home.

3 – Importance of Financing

Speaking of financing, that should be carefully evaluated as well. Your mortgage program, interest rate, and down payment will directly affect the carrying cost of a property. For instance, if you go with an FHA loan with low down payment and monthly PMI, your mortgage payment will be higher than a loan with a higher down payment and no PMI. Additionally, larger down payments also lead to lower interest rates. It’s helpful to compare the different scenarios and weigh your options.

Suitable Properties for Living Rent-Free Through Multi-Family Property Ownership

The fact is, some properties are better suited for owner occupancy than others. Although your primary goal may be to live rent-free, the quality of that living is also important. Properties with separate entrances for each unit, dedicated parking spaces, and other similar features will be more appealing. These features may also give you the opportunity for condo conversion in the future. As you work towards the goal of living rent-free through multi-family property ownership, don’t lose sight of other factors that are beneficial and will result in greater return on investment.

Given the complexities of these calculations and weighing other factors in your investment purchase, be sure to work with an agent who specializes in multi-family properties. Contact us to be referred to an agent in our network.