How do I value a multi-unit property if I plan on living in one of the units?

[Brian L.]

Do I analyze it the same as a straight income property?

[Jon Holdman]

I would initially evaluate it assuming it was fully rented. Does it meet your investment goals assuming full rental occupancy?

Then, evaluate it from the perspective of a place to live. Does it meet your requirements for living space?

At this point, I would almost certainly be done, because my living requirements and investment goals conflict. Add on living right next to my tenants and I wouldn't do this.

Assuming you get past that, now factor in your bad tenant - you! You're not paying any rent. So, subtract out your rent. OTOH, you're probably not going to trash the place or have to be evicted. But you're also probably going to make improvements to your living unit that you wouldn't do for a rental. Tenants are tough on space, so you want highly durable, easy to repair finishes. But for your living space, you may want nicer finishes and weird colors (this is were I get into trouble.) So your maintenance and improvement expenses may be higher. In the end, you may have to make compromises that decrease your yield, reduce your quality of living or both. But if the property makes enough money, and you're willing to live with the compromises, it may be OK.