Why You Should Buy That Duplex and Rehab That Fixer
There are some really great and interesting ways to build your real estate portfolio and in this blog post we're going to talk about two of them. These aren't always easy but it can help people at different economic levels enter the real estate market and start building wealth. Both of these options are really popular for younger people, including our younger members. They make getting into rental housing more affordable and they both provide the foundation for a great rental housing business.
Time to Get Neighborly
What if I told you that you could live in a house and get someone else to pay the mortgage? Seems a bit outlandish right? It's not and it's very possible, right here in the greater-Seattle area. In fact, we have quite a few members who have just this sort of arrangement. And the best part is that you can build your real estate portfolio and reduce your monthly expenses at the same time.
What's the arrangement?
Yes, the common, everyday, garden variety duplex. The duplex is nice because it has many of the advantages of the single family home but with the added bonus of having a house that you can rent out and use to pay all or part of the mortgage. Buying into a duplex and living in one half, while you rent out the other is a really common way for younger people to get into the real estate market. With small improvements over time, you can either sell the duplex and upgrade to a large building or leverage the equity and buy other properties. Duplexes are a fairly common construction arrangement in close-in suburbs because it is denser but often has the lower cost advantages of single family houses and are easy to construct. However, before you start combing the popular real estate sites for duplex listings, there are some down sides:
- You live really close to your tenants (they are your new neighbors)
- You may need to put up fences to split a shared yard
- Any problems that they might have (water damage, bed bugs, mold) not only is affecting your rental property but now also affects your personal living space.
If you can recognize these difficulties, mitigate your risk, and find the right property, buying a duplex as your first home and investment property can be a great way to enter the market. Duplexes are often the same price as a single family house. Often, all the regular financing options are available and there is the added benefit of generating income right away. However, buying a duplex is not your only option. There is another more interesting way to get in the market.
The Live-In Reno
Does living in an old house that is falling apart have some appeal? For savvy first time home buyers and investors, it can have plenty of appeal. For many Americans, their home is their biggest asset and one of the ways they build the most wealth. For those who are interested in investing in real estate, using their first home purchase as a way to start building their real estate portfolio. How best to do that? Buy a fixer upper and live in it. Combine your investing expenses with your living expenses and after the renovation, you can leverage the equity for your next property which you can rent out or live in using the renovated property as a rental. Then, you have two properties and a solid foundation on which to build a growing real estate portfolio.
This option is also great for someone who needs to pay-as-you-go. If you can't afford to buy a house and then spend money fixing it up right away, you can live in your property and fix it up slowly over time (2-4 years) and make strategic decisions on how to get that property ready for sale or to generate income. It can also be a great option for those looking in higher priced areas like Seattle. Seattle has plenty of small aging homes that need a buyer and a fresh face to update them. There are even more opportunities in the cities and suburbs around Seattle.
As with the duplex, there are some downsides to consider before you start combing those listings:
- A good deal may mean compromising your lifestyle or priorities while you work on the house
- The house is going to have immediate issues that will need to be fixed at move-in
- There can be financing concerns (see your lender for more on that)
- Navigating permits, contractors, and other service providers can be difficult as you also try to live your life!
But, if you're willing to make some sacrifices, there is tremendous opportunity to be had with houses that need renovation and duplexes. These options can be a great start to your rental housing business journey. If you're looking at getting into the market but don't know how, these ways might be just the way to get into the market, especially in the Greater Puget Sound region. There might a very enterprising person who does both and buys a duplex that needs fixing up and combines both of these together!