The Ten Most Common Duplex Buying Myths

mythbusters-2I’ve had a lot of first time home buyers sit down in my office the past few months to talk about making a duplex their first home.

Many of these buyers have heard myths from friends, family, or other “experts”.  As I don’t think there are any scientific experiments Mythbusters could perform, or any duplexes they could blow up to disprove the mythology, I guess it’s up to me.

Well, that’s frightening.

Here are 10 Myths to Duplex Ownership – debunked!

  1. You DO NOT need to have 20 percent down to buy a duplex, triplex, or four unit building. FHA insured financing is available for properties up to four units.
  2. You CAN count 75 percent of the current or expected rental income toward helping you qualify for a loan.
  3. Yes, the first time home buyer tax credit WAS AVAILABLE for multi-family properties. However, that program expired last spring, and there doesn’t seem to be any noise or congressional support for reinstating it.
  4. It is NOT more difficult to get financing for a duplex than a single family home. Of course, the rent from the other unit is going to have to be significant enough to offset what is typically a higher purchase price than a single family home.
  5. Maintenance will cost you a fortune. Yes, there are expenses involved with owning real estate.And you should budget for them when you buy the property. By the way, this is true of single family homes, as well. However, the four benefits of duplex ownership (appreciation, principal paydown, tax savings and cash flow), usually easily offset the expense of repairs.
  6. Yes, once every five to ten years, a tenant might call you with a plumbing issue in the middle of the night. They’re buying you a property! Call a plumber and take a nap!
  7. Side by side duplexes are quieter than up/down duplexes. Before I owned property, I lived in a 1920’s-built side by side. It had hardwood floors. And since the other unit and mine were mirror images of one another, the two halls leading to the bedrooms and bath shared a wall. I heard my neighbor every time he headed in that direction.
  8. Cash flow is everything. Yes, a property needs to make financial sense. But it also needs to hit your long-term investment goals. What are they? Where are you in life? Do you need additional monthly income now? Or are you looking for equity buildup to help you later in life?
  9. New is better than old. Depending on your location, the opposite might be true. Think of how your tenants (and you) react when you walk in to a property and see a built-in buffet, stained glass windows, ornately carved woowork or arts and crafts era tiles. Do you have an emotional reaction? Curiousity about all the people who once lived there? What’s more, most of these properties are located closer to the center of a city and have easy access to amenities like public transportation and employment centers.
  10. Tenants are difficult. Nothing outside of parenting will make you better at setting boundaries than being a landlord. Your obligation to a tenant is to provide a healthy, safe living environment. And if you’re wise, you’ll do enough of the extra improvements and thoughtful gestures to reduce your unit turnover. However, in my years as a property owner and Realtor, I’ve added two great rules to live by. First, “No” is a complete sentence. And second, you can always say “no” at first and change your mind. You can’t say “yes” and change it to a “no”.

If you’ve got another duplex myth, let me know. Especially if there’s something we can blow up in the process!