How to become a landlord? Purchase a multi-unit building, or pay off a cheap condo and rent it out? (Oak Park: rental)

[trax]

Gotta love late-night posting...

My goal over the next 5 years is to become a homeowner, but I'd really like to find a way to have some income-generating property. I have no fantasies about retiring as a land baron at 35--I just want to have a modest additional income stream to subsidize my day job.

I see myself achieving this in one of two ways:
Option 1: Buy a multi-family building (2-4 units). Shop carefully and identify something cheap enough so I can pay all the taxes and mortgage even if all the units are vacant. Live in one unit, rent out the others.

Option 2: Buy a dirt cheap one-bedroom condo in the $50-$80K range. I've found about a dozen in between Harlem and Oak Park Avenue in Oak Park. Live in it for a year or two, pay off the teeny mortgage, and then (in theory) buy some other place and keep that old condo around as a rental.

From the books and posts that I've read on owning rental property, it sounds like Option 1 is not something to be taken lightly, especially if tenants know that the building owner lives in the unit next to theirs.

Is Option 2 any easier or less stressful? I've heard horror stories about sudden spikes in assessments due to deferred maintenance that end up killing rental cash flow. Has anyone else done "spring-boarding" like this? Or do these ideas usually end badly?

[knitgirl]

I did option 1 15 yrs ago. Bought a 3-flat FHA, live in one. My sister lived in another until recently. We rented the largest apt and now her old apt. The largest one pays principal and interest on the loan, the other rental pays property taxes and water. I pay for heat and maintenance (which can be a major headache in a vintage property). I'm not sure if it's appreciated over the years or not, but it has been a lifesaver for me, as my income over the last 5 years has been very up and down with a whole lot of down.

[CSD610]

Originally Posted by trax

Gotta love late-night posting...

My goal over the next 5 years is to become a homeowner, but I'd really like to find a way to have some income-generating property. I have no fantasies about retiring as a land baron at 35--I just want to have a modest additional income stream to subsidize my day job.

I see myself achieving this in one of two ways:
Option 1: Buy a multi-family building (2-4 units). Shop carefully and identify something cheap enough so I can pay all the taxes and mortgage even if all the units are vacant. Live in one unit, rent out the others.

Option 2: Buy a dirt cheap one-bedroom condo in the $50-$80K range. I've found about a dozen in between Harlem and Oak Park Avenue in Oak Park. Live in it for a year or two, pay off the teeny mortgage, and then (in theory) buy some other place and keep that old condo around as a rental.

From the books and posts that I've read on owning rental property, it sounds like Option 1 is not something to be taken lightly, especially if tenants know that the building owner lives in the unit next to theirs.

Is Option 2 any easier or less stressful? I've heard horror stories about sudden spikes in assessments due to deferred maintenance that end up killing rental cash flow. Has anyone else done "spring-boarding" like this? Or do these ideas usually end badly?

Personally I would never be a landlord especially if I had to go into debt to do it. Too much liability and aggrivation.

[akamsaisha]

If you're new to this: option 2.