| There is a lot of talk about getting your first | | | | additional properties. To understand why this is |
| house. It's part of the American Dream to get a | | | | the case we need to understand a few rules |
| house and maybe get a dog named Rover. But | | | | about how banks determine whether or not to |
| maybe someone's first home should instead be a | | | | provide loans. When you are purchasing your first |
| duplex. Why would I propose such a thing? Is it | | | | investment property banks will usually not count |
| possible I am a secret Russian spy that hates | | | | the rent as income unless you have owned |
| American pie? No, there are simply too many | | | | investment properties for over 2 years. So if a |
| advantages to buying a duplex first. Buying a | | | | buyer first buys a house and then wants to buy |
| duplex has a number of financial advantages over | | | | a fully rented duplex they will need to be able to |
| buying a house. A lot of people assume that | | | | qualify for the full price of the house and the |
| duplexes would sell for about twice of what a | | | | duplex combined. This can be difficult especially for |
| house sells for in the same neighborhood. This is | | | | someone in the beginning stages of their career. If |
| rarely the case. Duplexes are more frequently | | | | a buyer purchases a duplex first, in 2 years when |
| about 1.5 times the price of a house in a given | | | | they are looking for a house they can count the |
| area. So to pick an easy number if a house is | | | | rent from the duplex as income which can help |
| selling for 100k then a duplex should be selling for | | | | them qualify for the bigger house purchase. 3. |
| 150k. So let's compare buying a house to a | | | | Faster Payoff Another interesting way to look at |
| duplex. To keep things the same let's assume we | | | | it is that if instead of simply spending the saving |
| have 20k to put down and we are looking in the | | | | you incurred by owning a duplex if you were to |
| Austin real estate market so that the taxes are | | | | pay off your mortgage faster. So if you applied |
| 2.5 percent of the purchase price and insurance is | | | | $747.32 to your house it would take 30 years to |
| 0.4 percent of the purchase price. 1. Lower | | | | payoff. But if you paid your duplex of $566.68 |
| Monthly Payment To start off with let's look at | | | | and then took the additional $180.64 and applied it |
| the house. For the house we are going to have a | | | | to your mortgage you could pay off your duplex |
| 6.5 percent interest rate. 100k house price 20k | | | | in 18.5 years. So in 18.5 years you would have a |
| down payment Monthly Payment = $747.32 | | | | $150k duplex paid off instead of a $100k house |
| Moving on to the duplex. Since duplexes usually | | | | partially paid off. 4. Greater Benefits of Mortgage |
| have higher interest rates we are going to | | | | Payoff Not only will you pay off your duplex |
| assume a 7 percent interest rate. We are also | | | | faster but once you paid if off you will be in a |
| going to assume that the other side of the duplex | | | | better position. Once you pay off your house you |
| is being rented for $650. 150k duplex price 20k | | | | are living mortgage free but not payment free. |
| down payment Monthly Payment = $1184.18 Rent | | | | Based on the original assumptions (Austin Texas |
| Payment minus 5 percent vacancy = $617.50 | | | | 2.5 percent tax rate and 0.4 percent insurance |
| Monthly Payment minus rent = $566.68 The | | | | rate) you are still making a payment of 241.66 a |
| monthly payment on the duplex comes out to be | | | | month for taxes and insurance. In contrast once |
| 31.8 less than on a house. You might get different | | | | the duplex is paid off you are not only living in |
| numbers based on your area. In most areas a | | | | your duplex for free you are actually getting a |
| duplex leads to a lower monthly payment but | | | | profit of $255 a month. Buying a duplex is not for |
| there are a few real estate markets where the | | | | everyone. Some people do not want the hassle |
| opposite is true do always run the numbers. 2. | | | | of managing a property. And our article is not |
| Increasing Your Future Real Estate Purchasing | | | | proposing that everyone should buy a duplex. But |
| Power Besides the advantages due to a lower | | | | there are financial benefits to buying a duplex so |
| mortgage payment there is another advantage | | | | take it into consideration. |
| over buying a duplex first. Buying a duplex first | | | | If you are looking to purchase a home or duplex |
| allows you to make additional purchases while | | | | in the Austin Real Estate market Ki can help you |
| buying a house first can negate your ability to buy | | | | in your search. |