Owner occupied duplex - any experiences?

[jlee]

I'd like to take advantage of the housing market in the Phoenix area - hoping to buy within a year from now. I'm considering buying a duplex and renting half of it, then possibly after a year or two renting both sides and buying a regular house for me.

Has anyone here done the same?

 

[lykaon78]

Sounds smart if you can deal with being a landlord. Can you afford the mortgage if you don't have a tenant?

 

[jlee]

Sounds smart if you can deal with being a landlord. Can you afford the mortgage if you don't have a tenant?

Yes - whatever I buy will be affordable on my income alone.

 

[dawp]

I've lived in Duplexes before and I would not do it again. Same problem as with apartments, thin walls, noisy/nosy neighbors, plus if you share the backyard you will have to deal with that too.

 

[jlee]

I've lived in Duplexes before and I would not do it again. Same problem as with apartments, thin walls, noisy/nosy neighbors, plus if you share the backyard you will have to deal with that too.

I understand the downsides of having an immediate neighbor, but I also have to weigh the upside of having rental income. It's also just me and I don't care about having a yard, so no competition there. Ideally I won't be living in it forever - I'd like to turn it into a rental property and then move out into a single family home.

 

[Possessed Freak]

I live in a duplex. I love it. Having a built in neighborhood watch is nice. My latest neighbor put in a fence between the backyards, but I didn't mind the prior neighbor's kids roaming into my backyard. But it does require talking to the attached neighbors and finding out what sort of people they are. My current ones are quite cool. We have traded tools, mowed each others' lawns, shoveled together, whatever.

 

[Uhtrinity]

Did it for over 8 years and wouldn't have hesitated doing it again if I had found the right duplex, triplex, etc. The duplex is now being rented and pays the mortgage on a 2nd house. It was an up / down duplex btw.

 

[NetWareHead]

I have a friend who lives in a duplex and hates it. His neighbors are white trash and dont mow the lawn, shovel and accumulate junk in their bank yard. Both units share a septic tank and he gets pushback every time it comes time to empty it from the neighbors since they are also cheap bastards. It really is one problem after another with these people and his experience has cemented my view to never live in a duplex unless I owned both sides of the property.

Some duplexes come with their own HOA which covers only the 2 units and land. Both owners must pay into a fund monthly to cover items like septic and other maintenance. This is a better solution and at least you would have a legal method for dealing with an uncooperative neighbor.

 

[jlee]

I have a friend who lives in a duplex and hates it. His neighbors are white trash and dont mow the lawn, shovel and accumulate junk in their bank yard. Both units share a septic tank and he gets pushback every time it comes time to empty it from the neighbors since they are also cheap bastards. It really is one problem after another with these people and his experience has cemented my view to never live in a duplex unless I owned both sides of the property.

Some duplexes come with their own HOA which covers only the 2 units and land. Both owners must pay into a fund monthly to cover items like septic and other maintenance. This is a better solution and at least you would have a legal method for dealing with an uncooperative neighbor.

I'd hope I had some legal method being that I would own the building... I don't know anything at all about renting, though, so I have a lot of research to do.

 

[Gibson486]

My mom does it. It's a pain if the tenant complains over every little thing. If you get a tenant that is good, clean and minds his/her own, then it's good.

 

[Imp]

Can someone explain to me what a "duplex" is?

I was under the impression that it's just two semi-detached houses that share a party wall, but are completely separate properties and entities in the eyes of the law.

 

[rivan]

Can someone explain to me what a "duplex" is?

I was under the impression that it's just two semi-detached houses that share a party wall, but are completely separate properties and entities in the eyes of the law.

By definition, a duplex is a two-residence building. Sometimes they're split into separate properties, sometimes not. I'd think they'd be considered a condo if they were separate properties, as they would share the maintenance of any shared parts (though I guess they need a condo covenant/agreement to enforce that).

I owned a duplex (single building/property) for 8 years, collecting rent on the other half. Worked out BRILLIANTLY for me, after I learned how to a) become a better landlord and b) got tenants that didn't suck.

When I sold the place, the rent I was collecting paid all but $50 of the mortgage (after 8 years of small increases). At that point, I had an awesome tenant who took care of the place.

 

[Atreus21]

I'd like to take advantage of the housing market in the Phoenix area - hoping to buy within a year from now. I'm considering buying a duplex and renting half of it, then possibly after a year or two renting both sides and buying a regular house for me.

Has anyone here done the same?

I did it after Katrina. Bought an up and down duplex, renovated it, lived in the top and rented the bottom. A very profitable endeavor if you do it right.

My foremost piece of advice: Screen your tenants. Good tenants are very valuable. My second tenant was a family; a man from Cameroon and his Nigerian wife and step-son. They kept the place spotless, and were occasionally late on the rent but never fell behind more than two weeks. Exceptionally good tenants in my view. Really nice folks. They asked for a rent decrease after a year which I granted.

Second piece of advice: Keep the lease as concise as possible. The longer it is, the more room people have to maneuver and interpret.

Third: Make damn sure you have liability insurance, and encourage your tenants to get renter's insurance.

I can't stress how valuable good tenants are. Louisiana law is very much in favor of tenants, and you can't simply evict them if you don't like them. Conditions in gross breach of the lease must be met, and only in very specific circumstances can you keep the deposit, in which case you have to provide records of what the money was used for (usually only property damage is a legitimate reason). Talk to a lawyer friend about your state's laws regarding tenancy.

 

[highland145]

FWIW, TD Bank is considering rentals as "investment property" and they fall under their mortgage department. Meaning 3.88% for 15 years. That's a sweet deal.

 

[Numenorean]

Where is Phoenix, New Hampshire?

 

[satyajitmenon]

Where is Phoenix, New Hampshire?

Arizona. JLee is in the process of moving.

 

[Thump553]

What Atreus21 said a couple of posts above. My first home was an up and down duplex. We lived there for about eight years and were extremely fortunate to have good tenants the whole time.

It's like living in an apartment, not a single family home-except you probably will do all the mowing, shoveling, etc-and especially repairs. Mine was a 60 y.o. property so it had it's share of repairs, and believe me no one is shy about running down to the landlord downstairs for a repair any time of the day or night.

As long as you live there, your insurance and mortgage will pretty much treat it as owner occupied. Once you move out the insurance will skyrocket and coverage decrease, and if you refinance after you move it will be at higher investor property rates.

Worked for me at the time-very limited income, just starting out and had young kids but I'd don't think I'd do it again.

make sure the place is legal for renting before you buy and sit down with an attorney who knows something about landlord tenant law. DON'T rely upon your realtor.

 

[Uhtrinity]

As long as you live there, your insurance and mortgage will pretty much treat it as owner occupied. Once you move out the insurance will skyrocket and coverage decrease, and if you refinance after you move it will be at higher investor property rates.

When I moved out I switched from a homeowners policy to a landlord policy .... cost and coverage was similar. The only increase I have seen was in property taxes due to loss of the exemption.

 

[mshan]

I believe Phoenix was one of the heavily overbuilt areas, so you can't look at discount from peak price to determine if you are getting a bargain (peak prices were never real).

Personally, I would just find a comfortable rental at conservative rent for one year and really prepare your credit and financials to make yourself best qualified borrower one year down the road when you are ready to buy home you will live in long term.

I believe only 75% of rent counts as income, vs whole rental property being kind of a debt, so total amount you can prequalify for may be lower and you may pay higher interest rate because of increased risk.

 

[Imp]

By definition, a duplex is a two-residence building. Sometimes they're split into separate properties, sometimes not. I'd think they'd be considered a condo if they were separate properties, as they would share the maintenance of any shared parts (though I guess they need a condo covenant/agreement to enforce that).

I owned a duplex (single building/property) for 8 years, collecting rent on the other half. Worked out BRILLIANTLY for me, after I learned how to a) become a better landlord and b) got tenants that didn't suck.

When I sold the place, the rent I was collecting paid all but $50 of the mortgage (after 8 years of small increases). At that point, I had an awesome tenant who took care of the place.

Interesting. My entire future home plan revolves around living in one half and renting out the other. Sounds up my alley.

 

[OCGuy]

Just know that you will have to prove 30% equity in the Duplex in order to buy another owner-occupied property, and still be able to use the rents off of your Schedule E to offset the debt.

If you cannot prove 30% equity (generally done by drive-by appraisal), you will have to qualify for both houses on your own.

This is a new Fannie/Freddie guideline to prevent "Sign and bail" purchases. (Meaning person with no equity in their house realizes they can buy the one down the street for 2/3 of the price and have a 4.25% interest rate, and once that is done they just let the old house go into forclosure)

 

[jlee]

Just know that you will have to prove 30% equity in the Duplex in order to buy another owner-occupied property, and still be able to use the rents off of your Schedule E to offset the debt.

If you cannot prove 30% equity (generally done by drive-by appraisal), you will have to qualify for both houses on your own.

This is a new Fannie/Freddie guideline to prevent "Sign and bail" purchases. (Meaning person with no equity in their house realizes they can buy the one down the street for 2/3 of the price and have a 4.25% interest rate, and once that is done they just let the old house go into forclosure)

Good to know. If I find a decent place with a garage, I don't expect to be needing to move anytime soon but I will keep that in mind.

I believe Phoenix was one of the heavily overbuilt areas, so you can't look at discount from peak price to determine if you are getting a bargain (peak prices were never real).

Personally, I would just find a comfortable rental at conservative rent for one year and really prepare your credit and financials to make yourself best qualified borrower one year down the road when you are ready to buy home you will live in long term.

I believe only 75% of rent counts as income, vs whole rental property being kind of a debt, so total amount you can prequalify for may be lower and you may pay higher interest rate because of increased risk.

If I do buy a duplex it'll be something I can afford on my income alone. My only issue would be a 20% down payment - couldn't do that right now, but with a credit score somewhere north of 800 I am hoping I can get some first-time home buyer perks and not need 20%. The problem with rentals in Phoenix is you'll pay $700-900 in rent instead of a $400 mortgage. I understand there's more to owning a house than just the mortgage, but when the equivalent rent would cover mortgage, taxes, insurance, and a good portion of utilities as well...it's hard to stomach renting if I can avoid it. I'll be roommates with friends as soon as I move, so I am not in a huge rush to find something.

 

[Geekbabe]

I live in a side by side Duplex,landlord lives on the other side. He had horrible tenants before we moved in & we were coming from a horrible rental situation so we treat each other with great respect!. We've been here over 4 years now & have been very happy, side by side feels very much like living in a house.