Why Using Rental Income To Buy A Duplex Takes Experience

Many first time duplex investors believe that one of the best things about buying a duplex is their ability to use 75 percent of the income from the rental units as their own in order to qualify for the loan used to buy the property.

While this was certainly true during the real estate boom years, it hasn’t been the case for the last couple of years.

Fannie Mae and Freddie Mac, are two government sponsored entities that essentially buy loans from banks so they can then have money on hand to continue to lend.

And, when the market crashed, they decided they didn’t want to buy any loans where the borrower had used the rental income to qualify, unless that person already had two years of experience as a property manager.

Well, less experienced duplex buyers got a little good news this week, as Fannie Mae announced it was easing this restriction. Rather than requiring two years of experience, they will now only be asking for one.

While this doesn’t help first time duplex investors, it should free up some money for others.

Of course, local lenders may always decide whether or not they want to abide by Fannie and Freddie’s policies. By en large, many have favored more conservative approaches.

You’ll have to speak with your local loan officer to find out.