As an investor and a person who loves the water, when I read about an open house for a duplex that has water access and a deeded dock for $109,000, I sit up and take notice. When I read on to see it has a double attached garage and a second garage that is equivalent of a 5-car garage with a loft above it, I get in the car and take a look.

What I found was a large house surrounded by higher-priced single-family homes that was being used and marketed as a duplex. My experience has always told me that properties that are not marketed properly tend to create some good buying opportunities as the competitions for purchase is low.

The house was a two-level, single-family home known as a walk-out rambler or ranch home. The home boasted nearly 3,000 square feet, and it had a huge in-ground swimming pool. It all sat on a two-thirds acre lot at the end of the cul-de-sac. The property had deeded boat access, and the lower level was finished as its own apartment and was occupied by a tenant. The zoning allowed for one to two units. It was marketed as a vacant duplex.

As I toured the property to see if it would be a good investment, I instantly loved the potential of the property. It needed considerable updating, but the price was right and the upside was huge.

When converted back to a single-family home and updated, this property would demand a much higher price. The conversion consisted of simply converting the lower level kitchen into a den or office, or even a bedroom and removing the door to the stairway.

There was no doubt I could make a big upside with this property.

Overcoming the Challenge

My challenge was that I had just purchased a four-unit apartment building about six weeks earlier and I did not have the cash needed for a down payment on another investment property.

There may have been a number of creative ways to buy this property, such as leveraging other properties or asking for seller-financing, but I chose the most lucrative path.

I decided to move into the property and make it my homestead and keep renting the bottom apartment to a tenant.

Buying the property as an owner-occupant and living in the property while I updated it offered a number of benefits.

It created an economical way to live, while executing the value play. There were, of course, certain limitations on tax-deductible expenses as the owner-occupied portion of home renovations were not deductible.

I wound up purchasing the property for $99,000, and over the course of five years I updated and renovated the property.

Most importantly, I enjoyed what people refer to as resort-style living. I enjoyed the boating on the lake, the many pool parties and the enormous wood shop I had in the second garage.

After about five years when the tenant in the downstairs unit (yes the original six-year-long tenant) decided to move on, I converted the kitchen into a man cave style wet bar and the living room into a home theater room and the renovations were complete.

The renovation updates I made cost $55,000, for a total investment of $154,000. I sold it for $330,000. This proved to be both fun and lucrative. It combined a highest and best use strategy, with an owner-occupied investment strategy that I highly recommend.

It is important to note that tax rules that apply to these investments may vary by individual circumstances and state taxations rules, so check with your CPA. The basic idea is that the benefits are great and can also create great upsides.

Over the years, I have done a number of each of these owner-occupied and highest and best use strategies, either personally or assisting others to do so.

5 Benefits of the Owner-Occupied Investment

  • Lower interest rates/higher cash flows.

As an owner-occupied property purchase, you have access to the best interest rates possible, which goes to increase your cash flow and overall returns. Non-owner occupied loans are more expensive.

  • Homestead credit/higher cash flows

(reduced property taxes): NOTE: Homestead credit for owner-occupied 2- to 4-unit buildings are fairly common, but rules do change from county to county or state to state, so you will want to add this to your due diligence if you decide on such an avenue.

  • Lower cost of living.

With a tenant paying part of the house payment, your living expenses are reduced drastically. In this property, my tenant paid 60 percent of the expenses while only occupying 40 percent of the property size. This freed up money for me to do updates and renovations.

  • Allow for do-it-yourself renovations/Larger ROI.

As is typical in an owner-occupied investment, as you live there you have more luxury of time, so most of the work I was able to do myself. It was something I enjoy doing and was not so rushed to complete.

  • Higher quality tenants with lower management cost/higher cash flows.

When tenants know their neighbor is their landlord, you tend to attract better quality tenants. As you live in the building, your management costs are eliminated since you are right there to take care of issues as they arise.

With these benefits, I have been able to help many first-time investors acquire their first properties. It is a lucrative and affordable way to get started. It also provides for a great value play for investors who want to move up to bigger and better homes.  Visit Larry’s website

Categories | Article | Topics
Tags |
  • Larry Arth

    Larry Arth is the founder and CEO of Equity Builders Group, a Florida-based real estate investment group. A 36-year veteran of real estate investing, Arth also is an international consultant and speaker who each year assists hundreds of investors, both foreign and domestic, in realizing their investment potential. He analyzes locations for economic strength and for the largest and most sustainable returns and, most importantly, sustainable turnkey investment. His focus is offering turnkey investments to the passive investor. Visit his website at

Related Posts


Submit a Comment