Author Topic: Buying a duplex to live in/rent out half  (Read 7991 times)

windawake

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Buying a duplex to live in/rent out half
« on: February 05, 2014, 01:00:24 PM »
I'm just starting to accumulate some savings now that I'm two months into my new job after grad school. I'm thinking about buying a duplex and renting out the top unit while I live in the lower unit. The place is $269k, but overpriced in my realtor's (Dad's) opinion. I'd been looking at getting an FHA loan with $9,000 - $9,500 down. The rent from the upper unit is listed as $1,250 but could possibly be raised (I live in the same neighborhood now and rents are generally higher than that for a 2-bedroom, especially with a yard).

Anyways I keep going back and forth about whether it makes sense for me to do this. It would be awesome because the cost of the rent for the upper unit would essentially pay the mortgage (from my calculations). Plus I'd get a roommate for my unit, which would be an income of $600/month. But, I also have nothing else saved up besides a tiny bit in my 401k.

Any thoughts or ideas? I'm excited about this prospect but don't want to rush into anything. I do have parents who live nearby, are landlords themselves, and very helpful and handy in the case of needing repairs. They've also been known to give out 0% interest loans if something comes up.

ender

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Re: Buying a duplex to live in/rent out half
« Reply #1 on: February 05, 2014, 01:06:11 PM »
Are you married and/or have interest in this?

Do you plan on having the same job or living in the same city for 5+ years?

Do you enjoy the sort of work associated with ownership/landlording?

IMO the answers to "does this make sense" depend a lot more on your larger scale life goals than strictly speaking money.

Greg

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Re: Buying a duplex to live in/rent out half
« Reply #2 on: February 05, 2014, 01:13:02 PM »
Sounds ideal, but I'd think about living in the upper unit and renting our the lower one with the yard.  Having renters above you is a lot more annoying than below.  Think noise privacy.

windawake

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Re: Buying a duplex to live in/rent out half
« Reply #3 on: February 05, 2014, 01:34:14 PM »
I'm not married and I don't have a partner/boyfriend or the like. I love my city and have lived here since I was 18, and grew up nearby. I plan to stay here for quite some time, if not forever, and if I was going to move I'd probably just rent out both units. I love DIY type stuff and really want a house so I can have a big vegetable garden, plant fruit trees, and maybe have a chicken coop. My job isn't my dream job, but I like what I do enough and since I live in a major city (Minneapolis) I don't anticipate moving for a job since there are plenty to be had within easy biking distance.

The reason I'd want to live in the bottom is because I have a dog. Just opening the door and letting her out would be amazing. No leash-on-up-stairs-outside-pee-inside-down-stairs-leash-off to deal with anymore. I've lived in a garden level apartment for the last 2.5 years and my upstairs neighbor is incredibly loud and rude. She wears high heels on the hardwood floor anywhere between 3-7am, her dog barks at the littlest provocation, and she plays music loudly. I've totally gotten used to it, the convenience of just opening a door to let my pup out would be worth any bother.

Cassie

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Re: Buying a duplex to live in/rent out half
« Reply #4 on: February 05, 2014, 02:39:22 PM »
I think it sounds like a great idea in light of the fact that you can count on help from your parents for repairs if the need arises.  REnt is such a huge part of people's budget that to have the house pay for itself and have income from sharing with a roommate sounds like a good financial plan. 

Thegoblinchief

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Re: Buying a duplex to live in/rent out half
« Reply #5 on: February 05, 2014, 03:04:12 PM »
If it's overpriced, don't buy it. If it's been on the market for a long time (6+ months), make a low offer and see what they bite on.

Don't forget property taxes and insurance in your calculations. On a property that value, that is easily another $200-$300 a month depending on your area.

Whatever you do, only buy a duplex you can afford to pay the FULL monthly amount for at least 6 months, ideally indefinitely. Don't DEPEND on a tenant and/or roommate, because then vacancies become an incredibly stressful situation. And they WILL happen.

honobob

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Re: Buying a duplex to live in/rent out half
« Reply #6 on: February 05, 2014, 04:04:02 PM »
If it's overpriced, don't buy it. If it's been on the market for a long time (6+ months), make a low offer and see what they bite on.

Don't forget property taxes and insurance in your calculations. On a property that value, that is easily another $200-$300 a month depending on your area.

Whatever you do, only buy a duplex you can afford to pay the FULL monthly amount for at least 6 months, ideally indefinitely. Don't DEPEND on a tenant and/or roommate, because then vacancies become an incredibly stressful situation. And they WILL happen.
Substitute a market offer for low offer unless you're really good looking.  If there is a realistic possibility of a 6 month vacancy DO NOT BUY at any price.  Do you NOT value your dad's opinion as a Dad or a Realtor?  You can change one of those.

windawake

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Re: Buying a duplex to live in/rent out half
« Reply #7 on: February 05, 2014, 04:17:21 PM »
I can definitely afford the full price. I live in a condo now (that my parents own) and rent out the second bedroom and have never had a vacancy.  I get at least 10-15 interested people the first week I put it on CL. Even when a roommate fell through at the last minute I was able to find someone. The rental market in my city is very good for landlords. I had a friend a couple summers ago who had to promise to do all the yard work for a duplex just to get to live there! This was in the same neighborhood.

chasesfish

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Re: Buying a duplex to live in/rent out half
« Reply #8 on: February 05, 2014, 07:01:42 PM »
It's probably overpriced, but if you think the lower unit is worth $150k to you, the go for it.   Consider the upstairs rental's value at 100x monthly rent (the 1% rule)

Dicey

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Re: Buying a duplex to live in/rent out half
« Reply #9 on: February 05, 2014, 07:15:37 PM »
Given your parent's proximity and experience, I'd go for it and never look back. Your dad will help you make sure you don't over pay. Let us know what happens, please!

soccerluvof4

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Re: Buying a duplex to live in/rent out half
« Reply #10 on: February 06, 2014, 04:42:39 AM »
If rental demands are that high you should be able to get more for rent and knock the purchase price best you can. I say go for it as well but agree to stay upstairs and rent out lower. Plus its in most case's safer.