Posted by Rolfe Mpls/St. Paul on February 09, 2000 at 23:55:21:
Welcome to the site! One lot with two homes may offer you some opportunities. Always, always, analyze the numbers to be sure it works for you. Hire whom-ever you need to avoid problems.
Consider each of 4 benefits of owning an income producing property; Cash Flow, Principle reduction, Tax Savings, and Appreciation.
First, if the numbers are right, the rental property certainly could provide cash flow. But the entire mortgage for one lot/two homes? Check into that, the income may not sufficient to cover the the mortgage and expensee for both houses, but it will certainly help.
Second, Principle reduction. In essence, through their rent payments, your tenants will be helping you pay your mortgage, which slowly but surely reduces the amount you owe.
Third, there will be tax savings (depreciation and business expenses) generated ONLY by that portion of the property which is rented.
Fourth, appreciation. Your property will probably increase in value over time. Although the tenants pay a chunk of the mortgage, you will receive the entire benefit of apprection, which increases your equity in the property, boosting your net worth.
My advice? Go for the two homes/one lot deal. In my opinion, the cost and hassel of splitting the property would be prohibitive. The final products may be less than optimal. Keep the lot intact, live in one house, rent the other. After awhile, move on, keeping the property as a duplex, one lot with two rentals - that should generate a cash flow. If you buy another lot with two homes, you’ll have 3 rental homes and your own home! Then 5 rental homes, then 7, then 9, etc., etc.