Have you ever heard of the term mother daughter house?
As a real estate investor, you might be wondering what this means and if buying a mother daughter house is a good investment.
When it comes to alternative real estate investments, this type of house is often misunderstood. However, for the right person, it can make an excellent investment. If you are a curious investor who enjoys having unique properties in your real estate portfolio, learning about different types of real estate can be rewarding and lucrative.
In this article, we will answer two questions:
- “What is a mother daughter house?”
- “Should I invest in one?”
What Is a Mother Daughter House?
A mother daughter house is a single family house with two separate kitchens. Essentially, it has two full apartments, but it differs from a multi family home in that the apartments do not have their own separate entrances.
The benefits of owning this type of house include having additional space and amenities without paying the high taxes associated with a multi family home.
The drawback? You’ll want to charge more for the additional amenities, and not everyone is in need of them. It is a little more difficult to find someone to rent this unique space to.
You might be thinking that it could be difficult to deal with such an unusual space, and you aren’t wrong. Depending on the circumstances, a mother daughter house could be less than ideal. But, you’d be surprised to find out that in the right location, these types of homes can become incredible assets.
Investing in a Mother Daughter House
Every real estate investor has their own set of goals, and that means that alternative real estate investments such as a mother daughter house might pay off for some more than others.
Key factors in the profitability of a mother daughter house are its location, demographics, and potential functional use.
College Towns
As you may have guessed, college towns are excellent places to invest in a mother daughter house. There aren’t many situations where a group of people who aren’t family would want to live together, and seeing as most families share one kitchen, paying for extra space isn’t typically worth it for tenants.
However, if a group of friends wants to split an apartment, they will likely be willing to splurge a little for some extra privacy and space. And because they know each other, there is no need for separate entrances. For these reasons, college students make great tenants for a mother daughter house.
Related: The Best Cities to Buy Rental Property in 2019? College Towns
Of course, when it comes to renting to college students, there are things to look out for. They can be quite messy and destructive, and if you have neighbors nearby, you might end up dealing with noise complaints.
But before you decide against owning a college town rental property, you should recognize that it is a lucrative investment strategy. It costs college students a fortune to live on campus, so nearly any private apartment would seem like a discount. If your mother daughter house is within walking distance from a college, you can raise your rent to match this convenience for students; they will be happy to pay.
Large Families
This is a difficult demographic to pinpoint, but catering to large families who need extra space is another way to fill an empty mother daughter house with tenants.
In expensive neighborhoods, it can be difficult to afford rental rates comfortably. Oftentimes, families will stick together and share housing to cut down on costs. Examples include college kids staying at home or grandparents living with their children to care for grandkids.
While a mother daughter house could be appealing to people in this situation, how do you know if the mother daughter house for sale you are considering is in the right location?
If the area you’re investing in has a low average household income compared to the average rental rates, there might be a demand for this kind of living situation.
Vacation Destination
If the above two situations don’t apply to the mother daughter house you are considering, ask yourself if it is located in a vacation destination.
This type of home makes a great Airbnb investment property because it can accommodate large families or multiple families who want to vacation together. Sometimes one kitchen isn’t enough for big groups, and if guests have the opportunity to spread out and get comfortable, they’ll gladly take it over a regular single family.
For this reason, owning an Airbnb that is a mother daughter house can make a difference in getting more bookings. This is especially true if the vacation home is located near a destination that is family-oriented and your mother daughter house has extra bedrooms.
Related: How to Find Vacation Homes for Sale to Rent Out
Is a Mother Daughter House a Good Investment?
Buying a mother daughter house can be a great investment for the right location. However, you can’t make an assumption that the location is right just because it fits some of the above scenarios we’ve pointed out.
In order to determine if a mother daughter house is worth investing in, you will have to conduct housing market research and rental property analysis.
Related: The Most Profitable Types of Real Estate Investment for 2020
Real Estate Heat Map
One of the first ways to start your rental property analysis is by analyzing neighborhoods. You can do this with Mashvisor’s real estate heat map.
The heat map can show you how profitable a particular area is, and it can also help you to determine the best real estate investment strategy to use in a given neighborhood- traditional or short term rental properties.
Analyze the neighborhood before investing in the property.
Rental Property Calculator
The second tool to use in your rental property analysis is the rental property calculator. This handy piece of real estate investment software will calculate all of the relevant metrics needed to understand the profitability of the rental property you are considering.
Metrics Mashvisor’s rental property calculator calculates:
- Cash on cash return
- Cap rate
- Cash flow
Use Mashvisor’s Rental Property Calculator to analyze the investment potential of a mother daughter house for sale.
Other features of the rental property calculator:
- Insight on the best property type for your goals
- Estimate the rate of return on a rental property
- Guidance in choosing a financing strategy
- Data/analysis for both traditional and Airbnb investment property
As a final answer to the question, “Is a mother daughter house a good investment,” it really depends on your goals, the neighborhood, and the rental property itself.
Putting up a mother daughter house for rent in the right market can be a lucrative investment strategy, but only if you’ve done your homework and have numbers to back up your decision.
Luckily, it has never been easier for real estate investors to find profitable rental properties, thanks to Mashvisor. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.