What is a Bi-Level House and Should You Invest in One?

When exploring real estate options, you may come across bi-level houses—homes that feature two distinct levels connected by a short staircase. These homes offer unique layouts, efficient use of space, and often come at a more affordable price compared to traditional two-story houses. But are they a smart investment? In this article, we'll dive into what defines a bi-level house, explore its pros and cons, and help you decide if investing in one aligns with your financial goals and lifestyle needs.

What is a Bi-Level House?

A bi-level house is a residential property that has two levels. These ranch-style homes have a common entrance that makes both floors accessible. The bi-level home design focuses on adding extra living space through a vertical addition. Other home designers focus on horizontal expansion to increase a home’s square footage.

Key Features of a Bi-Level House

Each bi-level house has its own charm, but these are the key features you will find in one of these homes.

Entrance Level

The entrance level of a bi-level house leads to the central hallway. This hallway gives someone access to the upper and lower levels of the house.

Upper Level

The upper level of a bi-level house is typically more private. It features bedrooms and bathrooms and is more suited for homeowners than guests.

Lower Level

The lower level of the house has rooms where people gather. The kitchen and dining area are two of the types of rooms that make up the lower level. For many bi-level homes, the lower level also provides a seamless transition into the backyard. 

Half-Flight Stairs

The upper and lower levels are connected by a half flight of stairs. These stairs create a natural flow between the levels and increase the home’s functionality.

Pros of Investing in a Bi-Level House

Some people like bi-level homes, but investors have to consider if an asset has the potential to generate high returns. Luckily, bi-level houses present several advantages to investors. 

Affordability

Bi-level homes are typically more affordable than larger single-family and multi-family homes. It’s easier to get started with real estate and diversify your portfolio if you invest in bi-level houses. Your money will have more mileage if you invest in these properties. It can help new investors if they learn from their mistakes with an affordable property versus making the same mistakes with a multi-million dollar single-family home. 

Potential Rental Income

Bi-level homes can become attractive rental properties that generate steady cash flow for investors. The cash flow can help offset your mortgage payments and other expenses. The bi-level nature of the home can help you rent the property to multiple tenants. You may have success renting each floor to a different tenant. However, the bi-level home would have to be constructed in a way that provides both tenants with sufficient privacy and amenities. 

Adaptability

Bi-level houses are relatively easy to renovate and customize. You can adjust the interior to match current trends, a strategy that can increase the home’s value. 

Low Maintenance Yard

Bi-level homes usually come with smaller yards. While there isn’t as much outdoor space, a limited yard doesn’t require as much work to maintain. Investors can save money since the outdoor space doesn’t require as much work. 

The Cons of Investing in a Bi-Level House

Although bi-level houses offer several advantages for investors, it is important to consider the disadvantages before committing to the asset.

Limited Square Footage

Bi-level houses are cheaper for a reason. These properties don’t have as many square feet as other types of single-family homes. Potential tenants may not be as happy with the low amount of space and may prefer another property instead. Houses with fewer square feet tend to attract consumers with lower incomes. It’s all good if a tenant continues to make the monthly rent payments, but people with higher incomes and credit scores may opt for more spacious homes. Renters with lower incomes contribute a higher percentage of their monthly income to rent payments. This will limit your ability to raise rent without the tenant looking for another unit.

Resale Value

Bi-level houses are affordable, but you shouldn’t bank on them appreciating that much. You can sell a bi-level house at a higher value in a few years, but larger homes tend to appreciate faster. A lower growth rate will impact the total return on your investment. 

Limited Outdoor Space

Bi-level homes don’t have the most outdoor space. Tenants can find other homes that have communal spaces or larger backyards. The smaller yards can discourage potential tenants from visiting your property.

Key Factors to Consider When Investing in a Bi-Level House

Real estate investors should consider a few factors before investing in bi-level houses.

Location and Neighborhood Dynamics

Real estate investors can choose from various types of properties, but the property’s location always impacts its  value. Investors should look for promising neighborhoods with good growth rates, schools, and transportation options. Areas with more amenities can also help you command a higher price for your bi-level house. Investors should review trends to gauge what the area may be like in the future.

Property Condition and Repairs

Every real estate investor should hire an inspector before closing any deal. An inspector can give you the scope of the property’s condition and the necessary repairs. Any issues with the home’s structural integrity, electrical system, plumbing, and other essentials will lead to extra costs. Investors should assess the total repair costs when making offers.

Market Trends and Demand

Investors should monitor  the real estate market and overall demand for bi-level houses in your target area. Historical data can help investors predict future trends and adjust their investment parameters accordingly. A timely and informed investment decision can increase the total return you generate from a bi-level house. 

Investment Strategy Alignment

Real estate investors should assess their financial goals and portfolio objectives before acquiring any property. A bi-level house can align with your goals, but some properties hurt more than they help. Investors should also consider if they want to fix and flip the property or opt for long-term rental income. The way you approach real estate investing determines the best properties for your portfolio.

Financing Options and Budget

Real estate investors should assess how much they can afford for the down payment and their optimal monthly mortgage payment. While rental income can compensate for mortgage payments, you should anticipate vacant months. Mortgage payments become more important to consider if you want to flip the property after fixing it up. Investors should reach out to traditional mortgage lenders or private lenders to see their options. Investors should also consider the expenses outside of a mortgage, such as renovations and property management. 

Return on Investment (ROI) Analysis

While homeowners look for a home in a desirable neighborhood and consider how the property functions, investors must also consider the return on investment. Calculating the potential rental income, appreciation, and expenses can help you predict the ROI. Investors should only go for properties that demonstrate a positive ROI. If you look for several properties, you can filter your options based on which one yields the highest ROI.

Exit Strategy

Knowing your exit strategy before buying a house can help you secure a higher return on your investment. Some investors hold onto properties for too long and see them lose value during a correction. Other investors use the proceeds from selling bi-level houses to buy multi-family properties. 

Level Up Your Real Estate Investing

Bi-level houses make it easier to get started with real estate. Investors can make lower down payments, receive rental income, and see their properties appreciate over time. It’s important to consider your financial goals and portfolio objectives before investing in bi-level houses.

Frequently Asked Questions