I am looking to get some insight and advice on a plan I have to get into rental property. Right now I am a renter myself, I have been working on increasing my credit scores and within the next year I am thinking of buying a duplex. I will live in one side and rent out the other. Has anyone here started like that and if so what was the experience like? Any advice you could give me from your experiences would be helpful. I am planning on buying a property that will need a little work, and one that I will be able to pay for on my own (without renters) with no problem. In my area I have found several properties just browsing the MLS listings that fit the requirement. DO I have the right idea here? Or is buying a more turn-key type property the way to go. I have been in construction for 11 years and have no problem doing most reno work, the stuff I cant or wont do i.e. electrical/plumbing/mechanical I have many contacts to be able to get the work done for a fair price. I figured I could build equity in the first year I lived there by upgrading the place to max rents while taking advantage of an owner occ mortgage, then moving on to another duplex and starting over. Maybe there’s a flaw in my idea…I’m not sure. Any advice is appreciated.
Its a great idea in theory, and since it will be an owner occupied property you will have more financing options available to you. However personally I would not do it. Why? I have dealt with tenants for a couple years now - and if you have someone paying rent late, if you have to evict someone, or if someone is causing some other sort of trouble…it sucks for you that they know where you live, where your wife and kids live and where your car is. That’s something to think about…
A long time ago, I lived next door to someone that bought a duplex to rent out half of it. It was the only duplex on the block. I only recall him having trouble with one family. The rest were pretty good. Of course, I’m sure the tenants acted a little better given nothing but a common wall separated them from their landlord. Just do a better job screening, and develop an exit strategy. Then you can either sell it with tenants (on both sides) to someone that will probably pay a premium because it’s occupied or keep it as part of your portfolio.
There’s a ton of arguments either way, but one thing is for sure. If that situation works for you, and you buy right, you won’t be stressing to hurry up and get it rented because you are effectively living there.
At the appropriate stage of life this is a great option. Since you are living next door to the tenant you will chooses a tenant that you don’t mind living next door to which is a good idea even if the property is across town.
This strategy works really well if you are renting anyway you can live where you own.
Thanks for the responses, it sounds like I am headed in the right direction. I can certainly appreciate the apprehension of living next to tenants, which is why I am going to buy a duplex that I can easily afford without the help of a renter. This should allow me to be very selective of my tenants.
You need to remember that it is cheaper to leave a property vacant than to put the wrong person in there. You’ve got the right idea about this being a good way to start out. Buy right though. Make the numbers work going into the deal. Don’t count on what you think you can raise the rent to in the future or how much the property might appreciate. Cash flow keeps you in business. Know how much it will take to get the place in good rental shape and what the market rent for that unit will be.
This is how I got started. I just moved out into a larger house and it’s worked great!! The fundamentals are the same as any other purchase.
SCREEN tenants well!! You have to live next to them!!
Your plans sound great! You are on the right track to building wealth using real estate as a tool. When determining the total costs of your purchase be sure to include any renovation costs so that you can afford your mortgage payment and any repairs in the future. Additionally, use some of the rent that you collect from the tenant to pay down your mortgage faster and save for repairs. The less debt you carry in the duplex the more attractive you are to future lenders. Best of luck!