I am interested in owner occupied investments. Do people still do this and is it still a good way to build wealth? I am told than many immigrant families do this when they come to America.
The issue I face is this: I qualify for a $300,000 mortgage. This is the city of chicago and this buys a 2BR/2BA new condo in a nice area of the city. But a 2-family house with actual land in the same area goes for about $500,000. Is there any way for me to afford this level of investment? Will the bank take into account the income from the other unit? I am still amazed that you can get actual land for less than double the price of some tiny condo without a parking space!
Yes mortgage companies will give you some credit for the rental income of the second unit that you rent out. Typically you will get 75% credit of the rent as net rental income from most lenders.
As an example if you buy the $500,000 duplex and lets say your total payment is $3500 per month with a low rate of interest. I am assuming rent of $1000 per month for the rental unit. Because of potential vacancy, maintenance and other expenses the lender would allow $750 of the rent toward your payment and making the payment you need to qualify for only $2750 instead of $3500. Of course the more the rent the less you would need to qualify for. You could also do a stated income loan at a slightly higher rate but with less qualifying. In some parts of the country where prices are lower you can actually buy a duplex and have the tenant cover the total payment even here in Austin once upon a time as the norm.