Should Your First “House” Be A Duplex?
Topics: homes, real estate, duplex, investing, properties, multifamily, mortgage
There is a lot of talk about getting your first house. Its part of the American Dream to get a house and maybe get a dog named Rover. But maybe someone’s first house should instead be a duplex. Why would I propose such a thing. Is it possible I am a secret russian spy that hates American pie. No their are simply to many advantages to buying a duplex first
Buying a duplex has a number of financial advantages over buying a house. Alot of people assume that in a particular neighborhood duplexes would sell for about twice of what a house sells for. This is rarely the case. Duplexes are more frequently about 1.5 times the price of a house in a given subdivision. So to pick an easy number if a house is selling for 100k then a duplex should be selling for 150k.
So lets compare the two. To keep things the same lets assume we have 20k to put down and we are looking in the Austin real estate market so that the taxes are .025 percent of the purchase price and insurance is .004 percent of the purchase price.
- Lower Monthly Payment
To start off with lets look at the house. For the house we are going to have a 6.5 percent interest rate.
100k house price
20k down payment
Monthly Payment = $747.32
Moving on to the duplex. Since duplexes usually have higher interest rates we are going to assume a 7 percent interest rate. We are also going to assume that the other side of the duplex is being rented for $650.
150k duplex price
20k down payment
Monthly Payment = $1184.18
Rent Payment minus 5 percent vacancy = $617.50
Monthly Payment minus rent = $566.68
The monthly payment on the duplex comes out to be 31.8% less than on a house. You might get different numbers based on your area. In most areas a duplex leads to a lower monthly payment but there are a few real estate markets where the opposite is true.
- Increasing Your Future Real Estate Purchasing Power
Besides the advantages due to a lower mortgage payment there is another advantage over buying a duplex first. Buying a duplex first allows you to make additional purchases while buying a house first can negate your ability to buy additional properties.
To understand why this is the case we need to understand a few rules about how banks determine whether or not to provide loans. When you are purchasing your first investment property banks will usually not count the rent as income unless you have owned investment properties for over 2 years.
So if a buyer first buys a house and then wants to buy a fully rented duplex they will need to be able to qualify for the full price of the house and the duplex combined. This can be difficult for someone in the beginning stages of their career. If a buyer first purchases a duplex first in 2 years when they are looking for a house they can count the rent from the duplex as income which can help them qualify for the house purchase.
- Faster Payoff
Another interesting way to look at it is that if instead of simply spending the saving you incurred by owning a duplex if you were to pay off your mortgage faster. So if you applied 747.32 to your house it would take 30 years to payoff. But if you paid your duplex of $566.68 and then took the additional 180.64 and applied it to your mortgage you could pay off your duplex in 18.5 years. So in 18.5 years you would have a $150k duplex paid off instead of a $100k house partially paid off.
- Greater Benefits of Mortgage Payoff
Not only will you pay off your duplex faster but once you paid if off you will be in a better position. Once you pay off your house you are living mortgage free but not payment free. Based on the original assumptions (Austin Texas 2.5 percent tax rate and .4 insurance rate) you are still making a payment of 241.66 a month for taxes and insurance. In contrast once the duplex is paid off you are not only living in your duplex for free you are actually getting a profit of $255 a month.
Buying a duplex is not for everyone. Some people do not want the hassle of managing a property. And our article is not proposing that everyone should buy a duplex. We are simply showing the financial benefits of buying a duplex.
If you are looking to purchase a home or duplex in the Austin Real Estate www.escapesomewhere.com market Ki can help you in your search. Ki is an Austin Realtor www.escapesomewhere.com with a long history of helping clients purchase personal and investment properties.
Previous Articles Highlighter:
Choosing The Right Ad Tracker For Your Business (1)
There is no point in purchasing a product at a drastically reduced price, if the product is shoddy or if you have problems with the product and can not get the support you need from the company that sold you the product.
Are You Running Different Ad Tracking Campaigns? (2)
Other inexpensive methods that you could choose from would be to set up a free web page on the Internet and then advertise your business on any free advertising forums you can find.
Affilliate Link Cloaking And How It Helps To Optimize You Business (3)
The initial cost of the affiliate link cloaking system may seem to be not worth it, but if you make a lot of affiliate commissions and then start to see them decrease, you may re-think the purchase to see your affiliate commissions go back up to where they should be.
Evaluating The Different Options Available For Downtown Austin Condos (4)
The Hilton probably has the most upper end units right now called the Five Fifty Five. To name a couple slick attributes, they feature wolf ovens, wood floors, 24hr.
The Two Sides Of Gentrification (5)
Make sure to try and make your new neighborhood a safe and nice place for everyone living in it. Sometimes this means money supporting locally owned shops and stores even though they may be more expensive, other times it means time.
Why Have A Realtor? (6)
A good Realtor also has the professional experience to handle all the aspects of an offer, negotiating, and closing process. There's more to offers than just a piece of paper with some signatures.
Finding Your Maximum House Price (7)
Ki Gray lives and works in Austin Texas. Working as a realtor in the Austin Texas Real Estate market. Escapeso Austin Texas Real Estate www.escapesomewhere.com is dedicated to providing its clients with honest and experienced advice when they are looking to purchase in the Austin market.
What Does It Take To Start A Blog? (8)
Take a little time to get it off to a solid start before you start trying to get readers. It makes their first impression of you better. Getting Comments This one is difficult.
Busy Children Learn While Playing Soccer (9)
Parents found that soccer gave their children an outlet for their frustrations too. Playing soccer also allowed children to build their self esteem and be around children that had the same interest in a sport that they found personally rewarding.
Run The Numbers Before Buying An Investment Property (10)
Even when looking to invest in a desirable rental area, it's best to always take into account at least an 8-10% vacancy rate. Do some investigation, look at your market and find statistics on the average vacancy rate.
Newer Articles Highlighter:
Realtor Tips - Body Language (1)
If the the guy who smiles so much maybe just doesn't have enough of a clue to know when he shouldn't smile. If that guy who never blinks might be a robot.
Seven Awesome Kitchen Gadgets (2)
5.Immersion Blender These hand-held gadgets can be placed in large drinking glasses, pots, or mixing bowls. You can mix drinks, baking ingredients, gravies or even whip potatoes. They take up less space and are easier to clean than traditional blenders as well.
Build Your Online Presense And Build Your Customer Base (3)
Many of them choose to outsource the search engine optimization of their websites to protect them from being shuffled to the bottom in result windows, to small business virtual assistants offering search engine optimization services.
Running Multiple Home Based Businesses Just Makes Business Sense (4)
Next it is always better to have more than one successful company. It just makes sense. The more companies you can efficiently run the better off you are.
Internet Marketing Services Can Be A Complete Scam (5)
For example let's take a look at these companines who promise you 1 million hits to your website. First off that is not even realistic but let's not even get into that.
6 Great Benefits Of A MLM Opportunity (6)
Last And Most Important: Residual Income With a regular job, you exchange your labor for money. If you don't work or are out sick, you don't get paid. Even if you own your own business and have the power of leveraged income, if you are not open the money stops coming in.
Stock Option Trading Tips And Tricks (7)
When choosing stock options to trade, you should make the choice provided you have leverage and limited risk. If you purchase a debit spread for $1,000 then no matter what you do or what the stock market does, you can only lose the $1,000 in capital that you invested.
What Is The Relationship Between Interest Rates And Bond Prices? (8)
Money bonds usually require a lot of time to grow and become profitable, but if you have a lot of patience and dedication, you will be greatly rewarded financially in the end.
Discover The Secrets On How To Pay Back Your Debts And Planning Budgets (9)
A large number of women in the United States who are debt ridden are facing such problems and they finally end up allowing a debt collector to get you all worked up, no matter how they act or treat you.
What Does A Credit Repair Service Offer For Loan And Debt Consolidation (10)
Creditors may report that you are in financial counseling, that payments have been late or missed altogether, or that there are write-offs or other concessions. If there is anyway you can talk with your creditors and have the patience to work out your own financial plan that would be the best arrangement.