Should we buy a duplex??

[isbjshaffer]

Hubby and I are considering purchasing a duplex, renting one half and living in the other, at least that's my idea. Hubby wants to buy one, keep our current house and rent both sides of the duplex. We still owe on the house ($116k) an will probably owe on it for the next 4 years (unless the duplex thing works out, then closer to 2 years) He has some student loans at lower interest rates than inflation so we're just going to make minimum payments on those until they're gone. That's the only debt that we currently have. We currently make 90k a year and have only recently worked out a budget where we only spend ~30k a year (including our mortgage) of our income and have committed to putting the rest toward paying off the house.

Most of the duplexes we're considering are 100k or less (80k after downpayment) and I don't know for certain but I imagine the rent around $600-700. Obviously we could cover it if we didn't have tenants but neither my husband nor myself are incredibly handy people (I want to learn) however - my FIL is a licensed contractor but lives 2 hours away and is generally pretty busy.

I think it's a better idea for us to move into one of the sides so we can kind of keep tabs on our tenant, and be there to keep the place up. I'm also afraid that if we don't move in, that we could be stretching ourselves too thin, increasing our debt, our risk and our length of time to FI.

If we move in, we increase our security in that in case anything (IDK what though) ever happens, the other tenant would basically be covering our mortgage, and our extra money would just be going to pay down a lesser mortgage than we currently owe, leading to FI sooner.

We would also need to sell our house to have enough for the down payment. We just had an appraisal done on the place and it was valued at 145k.

Hubby wants to keep our current living situation because the number 145k is bigger than 100k and therefore increases our value. I think that it's worthless unless we sell the house and can actually spend the equity we have in the house.

What say you?

[ender]

You should probably have a more confident rent estimate before making decisions based on that.

$1400 rent on a $100k duplex wouldn't be too bad, though..

[socaso]

I have never owned a duplex but it is a long cherished dream and I've done a ton of research and read a lot of books about it. It sounds to me like you need to do some reading. I particularly liked The Unofficial Guide to Real Estate Investing and Secrets of a Millionaire Landlord. After all the research I've done I think I've wiped the stars out of my eyes enough to realize that if you get in the landlord game you are getting a second job. If you only have one unit (assuming you are living in the other one) then it is probably closer to the level of a side hustle but you have to be prepared to leap into action quickly and effectively when things need doing. My father has owned all kinds of income properties during his life, from commercial buildings to apartment buildings to duplexes and it has been a profitable endeavor for him. I'm still anxiously awaiting the day I can jump into the game for myself.

[mozar]

I would focus on the student loans first, as that would give you more flexibility with your income, and then think about real estate. I don't think you are financially ready to take on more debt. (If you don't live in it)
Also remember that you have to cover vacancies that are longer than a month, house maintenance, finding tenants costs, insurance, transaction costs etc. I know there is a percentage that is considered good, but I don't understand it exactly. Poke around the forum and search for other duplex threads.
Instead of all this rigmarole, why not just get a roommate?

[zinethstache]

If you do it right, landlording will reward you threefold:

• of course you will receive passive income,
• the property is a valuable asset you can sell later AND,
• what I love most is that it is a great tax shelter.

You need to research, research, research. We read everything we could get our hands on for about a year then took the plunge. It worked out so well for us that we have 2 duplexes and a triplex with a rented shop. In 3 years we've only had one 'emergency' and it was not a midnight call. We've replaced 66% of our living expenses with this passive income, the goal is to hit the 100% mark in the next 4 years.

We feel it is a path best left to a DIYer. We use a Property Manager, but they call us first for maintenance as DH has the skills to do most repairs/maintenance. Folks on this forum like A Rebel Spy do the PM work and farm out the maintenance, the opposite of what we do.

Be sure you are set financially with sufficient savings to cover maintenance/repairs and vacancies. We saved 5% of the value of each duplex for the first two, but for the third unit we felt we had a sufficient amount and did not need more. Since you have other debt, it will be a challenge to have this fund for your property and not use it for your debts. It is a balance and you need to make a business plan for how best to go about having a rental.

The best of luck to you!

[navystache]

Be aware of the 50% rule.  Don't be surprised about the $3000 roof repair or new water heater, etc. 
The 50% is a rule of thumb that outside the mortgage take 50% of the market rent for unexpected costs.
i.e market rent is $1400, $700 a month should be set aside. 
mortgage $500
50% $700
You'll be cash flowing ~$200

Many people think the 50% rule is too much, but it has been tested and used by many successful real estate investors.