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Buy a Duplex – 3 Benefits Every First-Time Buyer Must Consider

by Matt Jones, CPA
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I’ve studied and digested hundreds of personal finance books, blogs, newsletters, and presentations over the past decade. They all focus on two things: earning more and spending less. That’s obvious and sound advice. But they rarely mention the best opportunity (in my opinion) to jumpstart your financial freedom. Buying and living in a duplex. 

I bought and sold two duplexes (living in the first) for a gain of over 400% in three years.

It’s called house hacking and if you’re in the market to buy your first house you need to consider it. In fact, anyone looking to jumpstart their personal finances needs to consider a duplex. Here are a few reasons why.

Reason 1: You don’t need a lot of money to get started.

You can buy a duplex without a large down payment. This is an option for traditional homes as well, but without a significant down payment you end up paying an incredible amount of mortgage interest yourself.

The amount of interest doesn’t change with a duplex, but receiving rent and expensing some repairs, maintenance, and depreciation improves the financial outlook. Your tenants are the ones paying that interest. 

With a small down payment almost anyone can afford a duplex. Of course, a proper budget and emergency fund are still important. 

Your tenant in the second unit will cover most, if not all, of the mortgage principal and interest cost. I know it sounds cliche, but this is the single most beneficial move (based on risk vs. reward) for most first-time buyers. It’s not for everyone, but everyone needs to consider it. 

Which brings us to our second reason…

Reason 2: You already know how renting works.

Like most people, you’ve rented an apartment before. You’ve signed leases, paid security deposits, and requested repairs. You know the process and the general expectations of renters and landlords. Now you’ll just be collecting rent checks instead of writing them (and handling repairs and complaints). 

Instead of moving from paying rent to paying a mortgage, you’ll actually decrease your housing costs, which is probably your largest monthly expense. You ease into homeownership, which is much more expensive than first time buyers realize.

A duplex gives you a taste of homeownership while someone else is helping to pay the mortgage. 

And finally…

Reason 3: Cash-flow.

I can’t emphasize this enough. In exchange for collecting rent and coordinating repairs, someone else pays (most of) your mortgage. Imagine your housing expense being reduced or eliminated. Your cash flow likely increases by 20-30%. You also build equity in the property and the tax-advantaged nature of rental income can reduce your taxes. Like I said… Every First Time Buyer Needs to Consider a Duplex. 

I could write a book on why everyone’s first home should be a duplex (hmmm…) and I love discussing the topic. I’ve seen it work for others and it worked for me. Share your comments below and reach out with questions. 

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