Owner Occupied Duplex

alisonSeptember 2, 2008

Has anyone had experience with this kind of arrangement? I'm lucky enough to be in a position where I can take care advantage of low housing prices, and I'm thinking of buying a duplex. there are a few that I've looked at that I really liked -- a little bit more than I planned to spend for a SOR, but still reasonable for my budget.

I'm single, in my 40's, have a fairly stable job and do freelance work. I've got a pretty big social network, and a long time friend who is interested in renting from me, so I don't think I'd ever be in a situation where I was renting to total strangers. But, having done a lot of work for a housing discrimination organization when I was younger, (and 20 years of apartment living!) I'm pretty familiar with the tenants rights side of things.

If you've lived in this kind of arrangment -- either as the landlord or the tenant -- I'd love to hear what you think of the idea.

Thanks in advance!

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What is "SOR", you might get responses if folks knew what that was.

Personally, I think renting to a friend (same with family) is the surest way of ending the friendship.

    Bookmark   September 12, 2008 at 5:58PM
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Ah, sorry -- Single Occupancy Residence -- conventional one household home.

And that's a good point -- money can be tricky with friends or family.

Any other thoughts?

    Bookmark   September 12, 2008 at 6:18PM
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Yes, you say "I don't think I'd ever be in a situation where I was renting to total strangers."

You can't predict the future. You may find yourself without friends to rent out to, and forced to advertise to rent to total strangers. Be prepared to have to screen, interview, run credit checks, have money set aside to advertise, and money for updates every time the unit changes hands and extra security measure to protect yourself and you property.

Even if you do rent out only to "friends" from your large social network, it is possible not to really know every thing about them. Treat them the same as you would a stranger when renting, and that would be to run credit checks and make sure you get security deposits and have your property properly insured against damage. Don't let anyone "slide" just because you happened to know them from somewhere.

    Bookmark   September 15, 2008 at 5:53AM
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I think the real question is, are you ready to be a landlord? Just because you are renting to a friend does not mean that the toilet won't get stopped up or the furnace won't die in the middle of the night. Because you will be living right next door, the tenant will know exactly where to find you.

I haven't rented in the exact situation that you describe, but I have rented from landlords who own only one or two small properties. I have had difficulties with getting things repaired. It's not my fault that the furnace stopped working on a Sunday and that the furnace repair guy charges more to come out on a Sunday. The landlady was very, very reluctant to call, but it was February, in Boston, and the high temperature that day was 28 degrees F. It wasn't until I mentioned the possibility of frozen pipes that she realized she needed to call for repairs. (The law at the time allowed for 24 hours without heat--calling at 8 am Monday morning would have been just under the wire.)

You will need to be prepared to deal with the maintenance of both units. You will need to be prepared to deal with the noise the tenant will make. And as a PP has said, someday, you may have to rent to a stranger. You will have to deal with the friends and visitors of the tenant parking at your house, being in the yard, having parties, etc.

I turned down an apartment in an owner-occupied building because it became clear that the owner would be monitoring my visitors. She clearly didn't want men in the building at all and insisted that there be no male overnight guests. While I don't think she could enforce that, I didn't want to deal with the hassle or even with someone checking out who was visiting me.

Bear in mind that you may find the ideal duplex, but one half might have a tenant in it all ready. You might have to wait until the tenant's lease is up before being able to rent to a friend.

    Bookmark   September 15, 2008 at 12:57PM
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After re-reading my post let me clarify that I did not mean to imply that OP had no friends, just that all of OP's current friends who are renters, may decide themselves to buy their own properties, or be totally content renting where they are now and not willing to change. The chances of OP having an empty unit available at the very same time that one of OP's friends is looking to move is slim.

Also, don't assume that all your friends will want to rent from you and make you their landlord. As previously mentioned, it is the quickest way to end a friendship and they may prefer to keep you as their friend rather than have the relationship go down in smoke with a landlord/tenant arrangement. Even with close friends, there are things that they have kept private from you, that you may find out about when they rent from you and you might find it unacceptable.

    Bookmark   September 16, 2008 at 1:13PM
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Oh, no worries; I didn't interpret your post that I had no friends!

But I'm not banking that "all" of my friends will want to rent from me, or that even some of them will. But with that large network, there is a greater chance that someone who is known to me will be in the market if the one unit I'm renting becomes available. And, as I mentioned, the mortgage is manageable without the extra income, so if it happened that I couldn't find anyone I was comfortable with, I could cover the mortgage for a while.

I understand that even with personal connections, credit checks and references, you may end up with a less-than-satisfactory relationship. Since I first thought of this possibility, I've talked about the ins-and-outs of the landlord/tenant relationship with all sorts of people; my current and a previous landlord, other landlords I know, other tenants I know, even the city's department of landlord/tenant dispute resolution.

The most important thing seems to be establishing very clear, precise, and legally binding understandings at the beginning. And be prepared to roll with the situation if something does go wrong, despite the best precautions.

Being prepared for repairs is a good point, camlan, and I think it's wise to look into setting up a contingency fund right away. (I may be able to get along without a toilet for a few days in an emergency, but I can't expect someone paying rent to go without!)

For the last year or so, I've also been checking out repair people. My current landlord has a good network of folks he can call to fix the toilet at 8am (or deal with a leaky ceiling at midnight) so I've been talking to him, and them, and every homeowner I know about repair people they trust.

Appreciate all the suggestions -- there's a lot of stuff to consider!

    Bookmark   September 16, 2008 at 1:59PM
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(I didn't mean "setting up a contingency fund" as in a separate bank account, just setting aside money so I would be coverd in an emergency.)

    Bookmark   September 16, 2008 at 2:01PM
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hi, alison. I do not have a duplex, but I do rent to roommates in the home I own. Obviously there are going to be some differences, but some similar issues as well, I'm sure. I'd be happy to answer any questions you have.

    Bookmark   September 16, 2008 at 3:08PM
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Alison, for tax and insurance reasons you do need a seperate bank account for the building.

Have you checked zoning laws (renting might not be allowed), talked to a bank, a tax guy and an insurance company?

    Bookmark   September 17, 2008 at 7:10PM
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I have talked to a loan officer and a tax preparer (both casually, not as people handling this specific property or my business.) I haven't talked to my insurance company; figured I might need to shop around since the folks that provide my renter's insurance might not be the best to handle property/landlord insurance. That's a good suggestion.

I assume it's zoned for rental -- it is a duplex, after all.

Quirk -- what kind of paperwork do you insist on? I know it's a little more pressing an issue when you have people actually in your home, but how do you handle -- what I guess I'd call "social expectations" -- behavior and access to shared space, noise issues, etc? And if oyu don't mind my asking, what's been you're stickiest stiuation and how did you handle it? Feel free to private message me if you like -- appreciate picking your brain!

    Bookmark   September 17, 2008 at 7:59PM
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alison, my rental agreement is very bare-bones. Cover the very basics (rent, late fees, responsibility for damages, notice required) and that's about it. The only thing maybe a bit odd that's in there is I prohibit firearms to be brought on the property because I just don't want someone whose temper, drinking habits, etc I'm not intimately familiar with to have a gun in the house I live in. Right to bear arms is all fine and dandy, but not in my home.

I do not under any circumstances do anything other than month-to-month, and potential roomie/tenants are aware that this is to give both of us the option to get out of the arrangement, no questions asked or reasons needed, if there is any conflict or disagreement or lifestyle incompatibilities. I also figure that since we're sharing living space, I'll find out pretty quickly if they're throwing wild parties that annoy the neighbors, or smoking in the house, or sneaking in non-housebroken pets, or other issues normal landlords might address in the lease. So, although it may be counterintuitive, I feel I need to be a lot less of a stickler about making small stuff into legally binding rules; it just doesn't seem necessary. You probably won't have quite the same level of transparency, but more so than an off-site owner. And, obviously, if there were a year's lease in place, that would be a completely different situation; you could get someone that was just intolerable but unless they're doing something in violation of the lease, you'd be stuck with them.

I try to be as brutally honest as i can, both about my own lifestyle and annoying habits and what my tolerances are for others. I will not even consider anyone who doesn't want to share that kind of information about themselves; they might be very nice people, but if they aren't interested in making sure we're compatible, I think they don't have a realistic idea of roommates and it is not my job to educate them. I will not consider anyone who is in any way inconsiderate of me during the process (traffic sucks, so if someone is late to come see the house, I understand, but if they're two hours late and didn't bother to call and let me know, they're out). I don't need to live with anyone who is not going to be considerate. I do not talk to people other than the renter (parents, boyfriends, etc)... they are welcome to tag along and meet me and see the place, but I want to talk to and handle arrangements with the person I'd actually be living with, because it's the only real indication I have of how well we'll be able to deal with each other.

Because of the m2m, and that I'm renting a room in a fully furnished home, and I live in a high-intern area, I tend to get a lot of short-timers; primarily grad students doing internships for 2 or 3 months. This can be annoying (they just get settled in then I have to start the process over), but they tend to be a pretty responsbile bunch, and don't generally have a lot of friends in the area wanting to hang out at my house all the time. Then again, current roomie's been with me almost 2 years, and the last one stayed for a year, so the m2m doesn't preclude people staying a while, either.

Honestly, I have been very lucky and never really had a bad roommate or situation. There has been an applicant here or there that made me uncomfortable for some reason or other (so I just didn't rent to them), and I have occasionally had someone get mad at me for saying no for lifestyle/compatibility reasons (which just demonstrated to me that I was right). One thing is that unless you have local laws to the contrary is you will not be subject to federal fair housing laws, so you can reject people for pretty much any reason, and don't have to worry about articulating or documenting why to legally cover yourself. Family's teenage son gives you the willies, don't have to rent to them, where an apartment complex can't make that same choice because they can't discriminate against families.

    Bookmark   September 18, 2008 at 11:07AM
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