Perhaps when looking for a property you should consider purchasing five or more units instead of that single family property. The price may be a little higher depending on where you buy but the advantages are too great not to consider.
Why? The primary reason for buying a 5+ unit property is because it is considered a commercial venture. Its the property that is being viewed on the basis of what it can generate as revenue. You as an individual don't count initially.
In the commercial world focus is on the property. If it is a good property with good cash flow and maybe some great potential, the likelihood is that you will be able to purchase the property. With a single family home (or anything up to 4 units) you are viewed as the principal....as noted, in the commercial world the property is the principal. This is a BIG difference in a lenders eyes.
The second reason is that you may be able to live on the property for FREE. There maybe enough income coming in from the other units to pay the mortgage. Yes with an eye on improving the property and getting a better tenant base, it may be possible to live on the property for free or at least at a reduced rate. This is a far better option than buying a single, duplex, or tri-plex or four-plex unit.
Oh yes.....there is a disadvantage to this scenario.....your tenants will be bothering you all the time to fix things ....so it is possible that you will be uttering the words "there is no rest for the weary".
If you are not handy (fixing small problems) and have to hire someone all the time it can be expensive and a drain on your bank account. BUT if you plan correctly, save on the rent that you are not paying, you can put yourself into an ideal situation of purchasing your own dream home 3-5 years downstream perhaps if luck is on your side for all cash.
If you do the work yourself understand the local codes....you do not want to violate codes because code enforcers tend to get upset with violators. Its a safety issue....you have tenants.
Yes you will have tax advantages to take advantage of....depreciation, deduction of the expenses of maintaining the property, the taxes, the insurance.....prorate these items and apply them to the units that you do not live in. Depending on your individual circumstances you may not pay any taxes at all for a number of years. Ok....maybe some tax. Hmmmmm......isn't that what the rich do?
Keep great records so you can pass an IRS or State audit if you are called upon to prove your expenses. A side note: if called in for an audit do not represent yourself. Hire a professional such as an attorney....some one who understands real estate and can show you a track record. I suggest an attorney only because of attorney-client privilege. The key is you do not represent yourself.
When it comes time to sell you can do a 1031 exchange....real estate for real estate and defer the profit from the sale. Be smart.
This strategy is not for everyone to be sure but it is a strategy that you should consider when planning to buy. So if your are just now looking to buy your own home (especially if its your first purchase) give this scenario some thought. It may be a great option for you.
To be sure you are limited by your own inaction and/or visualization. This type of investment may be your pass to greater rewards.