Remember when you were a kid and you were absolutely certain when the lights went off in your room, a monster would crawl out from under your bed? Or, in similar darkness, every doll on your shelf turned into Chucky?
Many of today’s Minneapolis duplex buyers seem to be thinking the same way.
They’re absolutely certain they’re going to lose their jobs and shortly thereafter, their property. Or, worse yet, overpay.
Several have insisted I turn the lights on.
In some circles, fear is an acronym for False Evidence Appearing Real. And it was certainly true of those childhood fears.
It’s also true of duplex-buying fears.
I realize we’re living in economic uncertainty; a time in which caution is a well-advised strategy. However, if you adhere to your goals when you purchase a property, in all likelihood you don’t have to worry.
Most owner occupant duplex buyers have a goal of their portion of the house payment being little more than they’re already paying in rent. In this market we’re able to accomplish that almost all of the time.
What’s ironic is while everyone worries how they’ll make their house payment if they lose their job, they never seem to worry about paying the rent.
When I ask whether they plan to move in with their parents if they lose their job, they recoil in horror. I ask whether they would go to the ends of the earth to not move in with mom and dad, and the answer is always a resounding yes. So if the mortgage is the same amount as rent, what’s the difference?
More importantly, if the property cash flows with two tenants paying rent, moving home to mom and dad’s might actually prove profitable.
Fear of over paying in a property is the monster in the closet. Unless someone is paying cash for a property, the transaction with require some form of financing. Every bank requires an appraisal be conducted before it will give someone a loan. And in today’s market, no appraiser is willing to overstate a property’s value.
Simply put, the bank won’t lend you more money than a property’s worth. You can count on it.
Just like when you turn the lights on, the monsters all go away.