Is Purchasing A Duplex A Good Investment? – Why We’re Doing It

Big news over here! We’re buying a duplex both to live in and as an investment property. As of writing this article, we actually have found a duplex and gone through the process of getting our offer accepted by the seller. We haven’t closed, but inspections are scheduled and things are moving in the right direction.

This is the third property I have bought and by far the most expensive. But the process has been extremely easy and I’m crediting this to our realtor and the lender at our bank. Both of which I will tell you about our experiences in future posts.

This will also be the first property I buy with someone else. This is a project that my girlfriend and I are doing together. This is a we project. Not an I. All decisions are split, all money is split, everything is split.

In this article, I want to breakdown why we are buying a duplex, how we’re doing it, and our long-term plan. This article will be a part of a series of pieces of content that I will post here at Young, Dumb, and NOT Broke?! as I know some of you have an interest in real estate.

That means full transparency. We’re going to dive into all the steps we took, the decisions we made, and all our numbers will be shown so make sure you are on my email list (you can take the Money Personality Quiz to get on it) to stay in the loop.

Why A Duplex?

Some of you may be asking: Why a duplex? Why aren’t we just buying a single-family home and moving in together?

To be frank, I’ve always wanted to add a multi-family property like a duplex to my portfolio. Add in the fact that her family has a history of rentals and real estate and you get someone that understands how investing in a duplex can be a great option for your long-term financial plan.

Aside from our personal reasons, there are a couple of other reasons we have decided to invest in a duplex.

A Duplex Can Pay Our Monthly Housing Bills – I have a full section on this coming up but we are house hacking this duplex. Meaning we are living on one side and will have renters in the other. The cash flow coming from these renters may not completely cover our housing bills but they will come close.
Duplexes Are Easier To Manage – Having two rental properties that are connected to each other will obviously make them easier to manage. Duplexes as well usually sit on smaller plots. This means a smaller yard to manage, making our lives as landowners easier.
Duplexes Are Easier To Sell – Duplexes are investment properties and there are always investors out there looking for the next deal. If you own a duplex that has a history of being filled with renters and decent cash flow, then you have an asset that will be appealing to any investor.
Duplexes Are More Affordable – In the introduction, I told you we were spending more than we ever have before. This is true BUT the amount of investment property we are getting for our dollar is more in regards to square foot/dollar of rent.
It Gives Us A Taste Of Being Landlords – Does real estate investing and buying duplexes specifically fit into our long-term plan? Not sure, but what I am sure of is that after our first year of ownership, we will know if this is something we want to continue to do. If we enjoy it then we can continue, if we don’t we can sell and move on with our lives.

Because of these reasons and after much discussion, we believe that investing in a duplex is the right move for us.

We’re House Hacking A Duplex

I talked about it somewhat in the last section but I know that “house hacking” is probably a term you haven’t heard before. What is house hacking?

House hacking means that you are the owner of some form of residential real estate. That can include a single-family home, a duplex, or a multi-unit property. You then live in one unit of that property and rent out the rest. So if you buy a single-family home, you live in one room and rent out the rest of the house by room. This is what I did in college. For a duplex or multi-family, you live on one side of the duplex or one of the units of the multi.

This is just the general guidelines, the standard way to house hack. But people have become creative and apply this same concept to garage space or even just a couch. You can stretch it even farther and rent out a storage room as a bedroom (don’t laugh, I know someone who did this and loved it) if it’s big enough.

The property we just signed the contract on has a vacant side and a rented side. This is perfect for us and presents a built-in opportunity to house hack it. If we can close on this property, the plan is to move into the vacant side as soon as possible and take over as landlords from the current tenants on the other half.

If you want to learn more about house hacking then check out my article: How To Start House Hacking When You’re Under 25.

I’m going to share all of the numbers we went through to determine if this was a smart investment in a future post so again, make sure you are on the email list!

Our Long-Term Plan

Do we want to live in a duplex our whole lives? Absolutely not. I’m all for having neighbors but having someone live on the other side of the wall from you is too close for comfort. What we believe is that we can sacrifice a year or two living in this property that we purchased that will allow us to get ahead financially. After a year or two of house hacking, we’ll be in a better place to then start thinking about a long-term living situation.

If someone asked me if I would be willing to buy a duplex, live in it, then have an asset that sustains itself and cashflows every single month I would say yes 100% of the time.

The Risks Of Investing In A Duplex

This is not a perfect plan and there are bound to be some setbacks. Investing is always risky. Investing in real estate and spending over $250,000 is even riskier ($283,500 to be exact). To combat this risk, we have been looking at all the worst-case scenario of this whole situation:

What if tenants don’t pay?
What if we have to evict them?
What if a water line breaks?
What if my foundation cracks?
Can I pay my full mortgage amount even if I have no tenants?

The what if’s can go on forever but these are important things to think about. I can’t answer these questions for you but you should take a long hard look at your finances before you make any investment decisions.

Hopefully, our past experiences can help combat these inevitable future setbacks that we are going to have. Because this isn’t going to be a cash cow and it surely won’t be amazing passive income, at first. But success doesn’t happen overnight and it takes some long term planning to get where you want to be.

If you want to learn more about the risks of investing in real estate specifically then I would recommend you read these posts:

Here Are The Biggest Risks Of Investing In Real Estate
Why Real Estate Is a Risky Investment
3 Risks of Real Estate Investing and How To Minimize Them

The Bottom Line

This post was a tad more exciting to write than most. We aren’t investing experts, we’re just a couple of barely over 25 year-olds winging it. But honestly, I believe we have done our due diligence and this decision will be one we look back on down the road and are happy we made.

We wouldn’t be able to make this purchase if we hadn’t been making financially conscious decisions, especially over the last couple of years. That includes using sites like Wealthfront and Tiller, using credit cards to take advantage of rewards and improve our credit scores, shopping at bargain places for groceries, and most importantly communicating about the things we want and sticking to the plan to get there.

I want everyone to know these tools and tricks so you are able to make those big purchases for yourself. That’s why I started Young, Dumb, and Not Broke?! and I hope that you can find everything that you need right here.

If you want to start with the basics, I recently launched my first course called Money Made Easy. Click the link and check it out. It is jam-packed with all the essentials you need to get yourself headed in the right direction.

Again, I’m going to make this into a whole series because I think it can shed a light on something that most people believe is just for the rich. Real estate does take capital to get started but it is more accessible than most people think. That being said, investment properties aren’t the right move for most. Hopefully, my content will help you sort that question out for yourself.

Investing is hard, life is hard, but at the end of the day, you have to try things to get where you want to be. We’re going to try getting to where we want to be by buying our first duplex, together.

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