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  • Writer's pictureKira Witherwax

A New Perspective on Your First Home

When most first-time home buyers envision their first house, they picture a single-family home. However, one way to make the dream of home ownership happen sooner and with more financial security is to consider buying a multi-unit home. Many people assume you need to have a large deposit or be an investor to do this. They don't realize that even an FHA Mortgage allows buyers to purchase a home that is up to 4-units if the owner will occupy one of them. This can be an excellent opportunity to get into home ownership without a large monthly expense.

According to , the "Federal Housing Administration (FHA) - which is part of HUD - insure the loan, so your lender can offer you a better deal."

You'll want to speak with a lender about what they can specifically offer through the FHA program, and they may have competitive conventional loans worth considering as well if you do have 5-10% to put down. My point is that multi-unit properties are well within reach for first-time buyer, even those utilizing an FHA loan.

Mathematical Breakdown - is it worth it?

While a multi-unit complex is not often what we've pictured as the next step following renting, this can be a great fit to start building equity and set yourself up to save quickly for the home you want.

For example, if you you are currently paying $1,200/month in rent, you are paying someone else every month and not earning equity of any kind. If, instead, you were to buy a duplex where your payment is around $1,500/month, you could rent half out for $1,200/month and use the tenant's rent to pay most of your mortgage (which you would be slowly paying off and earning equity).

Now, you'd have a place to live for $300/month and own something that you could resell down the road in order to build more equity. This puts you in a great spot to save up quickly for a larger down payment on a single-family home, if that's your end goal.

A Potential Path to Financial Freedom

With house prices still unattainable for many first-time buyer, this can be a viable option for you to stop paying rent, start building equity and set yourself up to buy the home you'd like to live someday.

If you're feeling defeated because you were hoping to be in your own home sooner, this plan doesn't necessarily have to alter your timeline. In fact, it may help you sooner, this may help you obtain it sooner since it is difficult to save up money while paying rent. For example, if you planned to graduate college, rent for four years and then buy a home. You could rent for two years, purchase a duplex, save up money and buy a single-family home within your total four year time frame. The difference is, within those four years, you'd now own two properties with the option to either sell the duplex or continue to rent it out for additional income.

There are many way to invest in real estate, but one of the simplest is living in a multi-unit property that you own. I wish that when my husband and I were looking into our first house, we had considered a duplex. It could have set us on a path for financial freedom if we had done it twenty-years ago.

As always, check with your real estate professional and lender to discuss your specific situation. You could potentially be living for free or close to it, while saving for your American Dream instead of funding someone else's.

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