The Best Way to Save Money: An Owner-Occupied Duplex

Save Money by House Hacking

As children, saving money seems difficult. As adults, we earn a whole lot more than the allowance we received on a daily or weekly basis as kids, but somehow, it seems even more difficult to save up for anything – even emergency funds or student loan payments. Why? As adults, our discernable income is typically at an all-time low. We deal with car payments, cell phone payments, insurance payments, and, of course, house payments (or rent payments). With all of these “payments”, there’s not a whole lot of room for saving up – even if your income is large.To combat this, we recommend owner-occupied duplexes. If that doesn’t exactly sound like a solution to you, allow us to explain.

House Payments Vs. Owner-Occupied Duplexes

In almost any scenario, the biggest financial burden that’s carried by an American adult is their house or rent payment. In this country, we’re familiar with shelling out a third – or even half – of our income to go towards funding our living situation.Here’s a better solution: living in a duplex and renting out the other half. In this kind of situation, many duplex owners are able to have half (or all) of their mortgage payment covered by a tenant living in the other half of the property.Owner-occupiers often end up paying less to own than they would to rent. Sometimes, they’re even able to generate rent payments that cover a huge portion of the mortgage. In these scenarios, duplex owners have found that they end up with quite a bit of financial margin. Instead of using up a third of their income on a mortgage payment, they end up using some of this money to fund dream vacations or future property investments.

Owner-occupiers often end up paying less to own than they would to rent.

While they may share a wall with their neighbor, owner-occupiers are finding that the money they save can be well worth the sacrifice of the “romantic” single-family home.

What You’ll Need to Get Started

For most investment properties, you need to have a sizable down payment ready in order to make a purchase. When you’re buying a duplex, however, you may qualify for an FHA loan that requires a down payment of just 3.5% of the property’s selling price. In other cases, you may qualify for a conventional loan with a 5% down payment. This is all assuming, of course, that you intend to owner-occupy. Different financing options are necessary for those looking to purchase a property strictly as an investment.Another thing that’s special about duplexes is the ability to use anticipated rental payments as a way to help qualify for your loan. Mortgage lenders are willing to accept the fact that duplexes, triplexes, and fourplexes generate income streams, and as a result of this, they’ll consider 70 – 75% of the anticipated rental payment from the property as stated income when you qualify.What does this mean? You may be able to qualify for more when purchasing a duplex as opposed to a single family home.

Ready to Get Started?

If you’re Minneapolis-based and talking about financial freedom has you ready to get going on a duplex purchase, we’d love to talk to you about what we offer as duplex specialists. We’ll help guide you through the process, allowing you to score a great duplex deal.If you’re curious about all of this and are ready to learn more, please do give us a call today to set up a free consultation. You can also read more about owner-occupied duplexes by reading this article on Getting Started with Real Estate Investing.