One of the most successful ways of creating wealth can be through home ownership.
While there are many reasons for this, including owning an appreciating asset and fixing housing costs for the long term, a strategy that starts with a duplex is an even more powerful instrument for wealth creation.
Why is a duplex more powerful than a house? There are lots of reasons, but let’s stick with the obvious ones.
Low down payment – As with purchasing a home, there are low down payment mortgage products available on the open market for duplex owner-occupants. However, there are fewer options. Several require the buyer to be a first-time home or duplex buyer. Once a buyer has purchased a home, the only low-down mortgage available to buy a rental property is an FHA loan.
Houses always have low down payments – Single-family mortgages have more low down payment options than those that require mortgage insurance (like FHA). Buying a house later without having a 20 or 25% down payment, as would be the case with a duplex, is always an option later.
Reduce housing expenses – By owner occupying a duplex, a buyer not only fixes their long-term housing costs through a fixed rate mortgage but also sets them up to likely be significantly less than they were paying in rent. That’s because rent from the other unit or units helps offset expenses that come with any kind of real estate ownership, like taxes, insurance and utilities.
Rent typically keeps pace with inflation – For the most part, rents go up as the cost of living does. This helps offset expenses over the long term.
Tax savings. The IRS views the unit you don’t live in as a business. Therefore, you can write off expenses incurred in the management and repair of that unit, as well as realize the savings created by depreciating it at tax time.
Someone else is paying it off. Whether you live there a few years or move out and retain ownership, someone else is paying off the property for you. At the end of your 30-year mortgage, even in the unlikely even in the unlikely event, it doesn’t go up in value, you have a great chunk of money for retirement that you didn’t have to come up with!
If you’re interested in learning more about real estate can help you not only create long-term financial stability but multi-generational wealth, call to set up a Zoom call with me. I’d be happy to teach you how the numbers work.