New Build Duplex Opportunity

[Brandon Blankman]

Hi Everyone--

A deal for a new build higher end duplex hit the market a few weeks ago. This consists of 2 units with  4 beds 3 baths and 2 car garage with a covered back deck. Other 3 bed 3 bath units in the area are renting out for 1400 a month. I would say with the nicer finishing and more space I could see these going for 1550 per unit. 

So my current situation has me living in a single family home I purchased 3 years ago with an FHA loan. I would really like to get into this duplex and house hack it. However I would have to get an FHA loan in order to do so. Thus needing to either refinance my current SFH and find a way to come up with the down payment on the duplex. Which ideally will lead me to renting the SFH and live in the duplex.

My second option would be to sell my current house and take the cash proceeds to purchase the new duplex. 

Im curious on how some of you would look at this situation and any advice is welcome on which path I should choose and why. 

[Rory Cummins]

Hi Brandon, I would first talk to your lender (or lenders if you have more than a couple to call) and find out whether they can qualify you for a loan on the duplex without having to sell your SFH first. If so, ask them if they'll then need a 12 mo lease in place. If not, you should be fine to move forward on the duplex regardless but if first needing a lease on your home, go ahead and put it on market for rent. Normally all the bank needs is a signed 12 mo lease to show that it'll be rented (not necessary to have already started renting it). That way, for instance, if the rent would be starting Sept 1st, it then frees your debt to income ratio from that loan (or maybe 75% of that debt vs. the rental amount) that way you can then qualify for the duplex loan.

That said, if it's going to cause issue in timing all this together or if renting your SFH doesn't qualify for the duplex, then I'd definitely just sell it. Long term, you'll get better value out of the duplex if you don't mind to live in it for a while. It should likely help or pay all the mortgage amount plus it'll be great cash flow when you eventually move out and also give you more 'outs' or options later as an investment vs. a single family home.

If it were me, I'd try to keep both instead of selling but you'll only know this once you've talked to a lender and given them all the info needed for them to make a decision. I believe with both FHA and Conventional right now, you can get in with as little as 3% down

Hope that helps...