Can You Purchase Duplex with 2 owners?

Question

Hi There,

I was talking to a friend of mine who was wondering if it was possible to purchase a Duplex together where they would get one unit and I would get another. Is this something that is possible?

How does it work when it comes to your debt-income ratio? Would you both have separate mortgages for your half or do you have one mortgage and its reported on your credit report that you have a mortgage for the full amount of the duplex?

Figured getting a duplex in Austin for say $575K split in two is ~$287K per unit and way more affordable. If something like this works, I can probably do another deal with another friend I know out of state who would likely agree to manage the property for me. The 2nd property would likely be purchased via a self-direct IRA. The one in Austin would be purchased traditionally either via FHA or 5% down.

Wayne Brooks · Answer

You would both own 50% of the whole property….you would not own one unit “separately” each….it is One property.

Jordan Moorhead · Answer

@Mark V. I may not have been clear on the loan situation. 5% down loans don't exist on duplexes for most. You have to make under $80,000 a year in Austin and have extremely good credit that's been great for a long time.

@Tim Swierczek can help you with loan options and the best route. He's a lender and an investor.

Aaron Gordy · Answer

@Mark V. One typically sees the condo conversions in the very expensive areas such as 78704 or Westlake. The cheaper way into the deal with less restrictions is probably a conventional loan 5% down so that you don't have to pay pmi and buy it in both you and your friends name. That is a good question for a mortgage broker though. Then you can work on condo'ing out afterwards. There are attorneys that do that in the city. Its a straight forward process and not as big of a task as one might think. Asking the seller to condo it out before is an expense that most sellers would not be willing to pay.

Eliott Elias · Answer

You could either own the entire duplex 50/50 or condo regime it and split them into two sellable units. If you condo regime it they will be separate mortgages

Jordan Moorhead · Answer

@Mark V. I understand and that might be a good option!

Keep in mind you only get 1 FHA loan and he only get's 1 FHA loan. If you buy it together you both just used your one.

I lived with a roommate when I bought my first duplex and just turned him into my tenant. It worked well for him because he lived for cheap, it worked for me because he paid me.

There's not a wrong way to do it, but personally I look to maximize my conforming loans because the terms are amazing and we only get 10 of them. With FHA you only get one but they're awesome because they're 3.5% down. The next cheapest duplex loans available for most people are conventional 15% down loans. Of course you want to verify it with your lender but the 5% conventional loan isn't available to most people for 2-4 unit purchases.

Mark V. · Answer

Anyone know a mortgage broker so I can plan what I need to do? I’m trying to figure out what to do for taxes for a mortgage application. If I report up I can show a lot more income but I pay a ton of taxes. If I report down, I probably won’t qualify but I could do a bank statement or 1099 loan and figure out how much I need to save up for the down payment. Trying to figure out the best route for me to do.

I’m W2 and 1099. My 1099 is more than my W2 this year.

i have had self employment income for several years now. This would be the second year in a row I would make 6 figures + in 1099 income.

Lynn Wise · Answer

Yes, it's common. The seller would have to split it, and that might be more than they want to do. The best way to do it would be to figure out a way to buy it (maybe with a partner) and then create a condo regime after closing. Aaron is right that it's even more common in pricier areas, but I've seen lower-priced duplexes do it too. There was one for sale in Pflugerville recently.

Mark V. · Answer

Is that common here in Austin? Wasn't sure. It would keep my debt-to-income ratio down though. Not sure how you buy a duplex like that from a seller to split it. Is that something they would need to agree to or do you split it afterwards?

Mark V. · Answer

Thanks --- self directed would be in the future with another home that I wouldn't live in. This one is for one I'm going to live it.

Can You Purchase Duplex with 2 owners?

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