The Duplex Home Buying Strategy

Dated: December 6 2018

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The Ultimate First Time HomeBuyer Success Strategy! 

First time Home Buyer?  Buy smart!  Understand your market and apply an appropriate Buying strategy designed to ensure your success.  Your Berkshire Hathaway HomeServices, Russell Realty Group Realtor can help you employ this winning strategy; yes, even as a First Time Buyer.  There's special financing and Mortgage products available should you choose to go this route.  Your Russell Team Elite Mortgage Loan Originator can get you well informed and aware of all your options.

The Duplex Strategy

Sure, you can purchase your first home, a single family residence you intend to occupy; certainly.  Okay, then what?  You invest your down payment, arrange financing, close escrow, and move in!  Great!  Good for you; you're on your way.  On your way to a 30 year mortgage commitment from your personal income and likely the biggest investment of your young life thus far.  However, this asset only pays dividends and return in the form of sentiment.  Yes, you have equity building, but you're the one building it.  So, essentially you're merely transitioning income, to equity.  Your substantial asset earns no income, no monetary return, nada.  You've really invested in a place to sleep, and a storage facility for your stuff, as you will likely be out each day earning income to meet the debt obligation.
What if
your first big investment paid a real return; cash dividends?  What if the debt obligation was met each month, however NOT from your pocket?  So, you've got yourself a Home, a true investment asset, cash flow, and someone other than you paying down your debt, thus increasing your wealth.  You've got yourself a duplex, a true asset, a multi-family income producing property.    Image title
A duplex is two units attached.  They are commonly found in neighborhoods among single family residences.  The strategy is straight forward; you occupy one unit, and you rent the other as the Landlord.  The tenant pays rent, thus paying down your mortgage debt, increasing your equity, (your wealth).  Duplexes are varied and the 
units vary widely.  Whereas; you can have a property with a 2 bed, 1 bath unit on one side with a full 3 bed 2 bath unit on the other.  The reason the strategy works is attributable to:

  1. COF, (Cost of Funds), better known as "interest rate"

  2. FMR (Fair Market Rent) rate

  3. Property values.

- Commercial Finance mortgage products generally have higher interest rates; fortunately, they don't kick in until 5+ unit multi-fam.  So, anything 1 to 4 units, (including a duplex) qualifies for regular, conventional, even FHA finance.  So you can conceivably get a rate comparable to purchasing a single family home.
Possibly coincidentally, FMR keeps a good pace in most markets with COF.  This economic circumstance allows the multi-family property owner to maximize cash flow from assets owned.  FMR is simply the average rental rate for any given area and you can use it to calculate your likely cash flow on any potential asset purchase. Our Team is ready to make such analysis to present to you.
The single-most advantageous component of the Duplex Strategy is property value.  It's simply math.  The differential between the cost of a single family home, and a duplex containing a unit with the same configuration of the single family is nominal; the disparity between the cost or property value is often times nominal.  Meaning, if you're looking for a 3 bed 2 bath Home and in your market you can purchase a 3/2 SFR for $385k, in that same market you're likely to be able to acquire a duplex with a 3/2 unit for perhaps $400k to $425k.
Here's where it gets even more interesting.  Let's say that duplex has the 3/2 unit on one side, and a 2/1 on the other.  Let's say you've not started a family just yet and that as an investment in your future, you're willing to occupy the 2/1 unit for the present time and rent the 3/2.  Given the typical FMR to COF ratio in most markets, you can bet the rent collected from the 3/2 will be more than enough to make the Mortgage payment!  Your tenant is paying your monthly nut!  Paying down your debt, increasing your wealth.  Now you're living "rent/Mortgage" free.

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I know.... winning; right!
Applying this strategy, in true Robert Kiyosaki form, now you're earning income from your asset column, eventually to have asset income replace wage income, completely.
Next, you build up a down payment again and perhaps a bit down the road you buy your single family home; your Home to raise a family.  You keep the duplex of course, renting the unit you formerly occupied.  My bet.... the total rental income from your duplex could quite conceivably cover both mortgage payments, the duplex, as well as your new family Home!
This.... is the definition of success and we can get you there!  Total solutions, wealth building through Real Estate; and yes, we guide First Time Buyers through this very strategy, and beyond.
Contact The Russell Realty Group of Berkshire Hathaway HS Elite Real Estate.

Start Your Journey!

Call us: (916) 216-4955

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The Russell Realty Group

Our Team THE RUSSELL REALTY GROUP As a Black and Latina-owned Business, we embody top-down diversity throughout our company. There is no greater sense of pride than the pride we have in that. A tr....

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