Becoming the Landlord: an Interview
Recent posts on Sweet Digs Seattle:
Given that the future looks bright for landlords, I asked a friend if she’d answer some questions on the subject of owning — and living in — a multi-family home.
Mandy and Sam didn’t start out looking for a multi-family home. The two were recently married and looking for a home of their own. Sam owned a house already, but they wanted a place of their own to begin their lives together.
While driving near the University of Washington, they passed several multi-family homes for sale, and Mandy suggested the idea as a joke: why not become the landlords?
Ruby Kane: So did you find the place yourself, or did your agent find the listing for you?
Mandy: We looked online ourselves, and found the property, then had our agent take us to the listing.
RK: Were you looking for both single- and multi-family properties? And if so, was your budget different for one than the other?
M: We were looking at both. Our budget—and what we paid—was $100,000-$150,000 more for the multi-family properties we looked at than the single family properties.
RK: Do you think you would have been approved for the same loan amount for a single family property?
M: No way.
RK: How many units are in your rental?
M: There were three livable units, and the fourth needed some work. We are still working on one apartment, but we live in one, and have two rented.
RK: Wow, that’s pretty quick. Did you have renters already in place?
M: We had one renter who’d been there for a year, and another we found on craigslist.org. We had a lot of interest in the apartment, and it took only about two weeks to rent it.
RK: If you didn’t live there, and all the units were rented, would you break even—that is, would the rents cover the mortgage?
M: We bought right during the mortgage meltdown—we have a premium mortgage, and bought at a premium sale price, as well. So the rents would not cover the mortgage.
RK: Is living in the apartment cheaper than renting the same apartment would be, since you have the incomes from the other units?
M: Yes, it’s definitely a cost savings, but the responsibility level is higher.
RK: Were there any surprises about multi-family purchasing?
M: Yes. It’s standard practice that you can’t see the inside of the occupied apartments until you’ve signed a purchase agreement. You still have ten days to walk away after you sign the agreement, but it’s scary to agree to buy something you haven’t seen!
RK: What’s your biggest fear about being the landlord?
M: Vacancy. If all of the apartments are vacant at the same time, we have about 2-3 months of mortgage set aside, but after that…
RK: Do you have any advice for people considering this option?
M: If you can swing it financially, buying a multi-family home is a great idea. You have to keep an eye on your risk, and plan well. But it’s been a great experience for us.
