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  • Writer's pictureKira Witherwax

Why Buy a Duplex?

Updated: Nov 22, 2022

Having a diversified income stream is always a good idea. Especially, when things go sideways.

Many people I know have a “side hustle” these days; sometimes for extra income and sometimes to bring fulfillment in a way their day job doesn’t. Both are great reasons. And, honestly, both probably helped during the pandemic.

And while hustling for income is great, I’d like to chat about passive income for a minute. Most Americans recognize the value of home ownership and consider it a solid long-term investment. It’s the American Dream after all. And for good reason (And there are all kinds of data to support how good home ownership is for our communities).

There are many ways to invest in real estate, but one of the simplest is the duplex. I wish that that when my husband and I were looking for our first house we had considered a duplex. We own one now, but it could have set us on a path for financial freedom if we had done it 20 years ago (and without 2 kids and an existing mortgage). Many people think investing in real estate once they’re more established makes sense, but I think it’s a good fit for a first-time buyer. I know all the reasons that it’s not appealing. It still feels like you’re living in apartment. You have (potentially, really close) neighbors. You must maintain a property that someone else lives in. And of course, there is some risk. Risk that they won’t pay their rent or that it will sit vacant for a few months between tenants.

Now that I’ve scared you, let me explain why I love this idea and why I wish the first (and maybe second) house I bought was a duplex.

Stay with me for a minute. If you are currently paying $900/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 $900/month, you could rent half out for $900/month and use the tenant’s rent to pay your mortgage (which you would be slowly paying off and earning equity) and either pay extra towards your mortgage each month (because you already had $900 budgeted yourself) OR you could save that $900 each month to save for a down payment on a single family home. If you’re renting currently, you know that rents keep going up. Well if you have a fixed rate mortgage your principal & interest payment will stay the same, while the rent you charge your tenant will slowly increase over time.

If you are currently a someone else’s tenant, you also know that good rentals are hard to find. So yes, there is some risk, but use what you already know about the rental market to balance that. If good rentals are hard to find, that means landlords (potentially you) have good odds of keeping their units rented. Yes, you would have to maintain the property. Passive income isn’t always completely passive; however, if you bought a single-family home for your first property, you’d also have to maintain it. And while it may seem like you’re still living in an apartment (which you may be doing if you’re living in half of your new duplex) you could potentially be living for free or close to it, while you save and plan for your American Dream instead of funding someone else’s.

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