Buying a duplex as a first home. Pros/cons.

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Buying a duplex as a first home. Pros/cons.

Nicholas Papineau
Member since 2020 · 1 post · 0 votes

My wife and I want to purchase and live in a duplex for 2-4 years. Half would be rented while we would occupy the other half. Does anyone have any negative experiences with living that closely to tenants?

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Paul De Luca
Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
5y

@Steven Chraca

It is very difficult to break even let alone cash flow while you are house hacking a duplex. You're mostly just mitigating your PITI payment, and having a partner split the payment with you makes it even better. Triplexes give you much better odds of cashflowing while house hacking, but the numbers make the most sense with a 4 flat obviously since you have greater economies of scale.

If you were to use an FHA loan for example, the property needs to pass the Self Sufficiency Test. It is only required for 3-4 unit properties, but often times it's hard to pass with a triplex but easy to pass with a fourplex.

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  • Jonathan StyerBusiness Member
    Real Estate Broker · Columbus, OH · Member since 2018 · 330 posts · 396 votes
    5y

    Hi @Nicholas Papineau, what you're describing is called House Hacking and is a great way to start investing. You just need to be able make the be best business decisions for your investment. Some owners like to hire property managers to take care of the tenants next door and the tenants do not even need to know you own it. 

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  • Jason P.
    Investor · Bay Area · Member since 2020 · 42 posts · 19 votes
    5y

    @Nicholas Papineau

    I have friends in Chicago that do this and love it. They only have one kid so they live in the one they are fixing up and then move to the next. Just need good tenants.

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  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    5y

    House hacking my second duplex now. So far no negative experiences with tenants living in the property. If you screen your tenants thoroughly, you will greatly reduce your chances of running into issues.

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  • Eric Deiz
    New to Real Estate · Chicago, IL · Member since 2020 · 2 posts · 5 votes
    5y

    Following this thread as I will be looking to potentially 'House Hack' myself next year.

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  • Brie SchmidtBusiness Member
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    Real Estate Broker · Chicago, IL · Member since 2013 · 6k+ posts · 5k+ votes
    5y

    I lived in my 3 unit from 2011-2014 and again from 2017-2019 and never had issues living next to tenants

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  • Steven Chraca
    Schiller Park · Member since 2018 · 9 posts · 2 votes
    5y

    @Paul De Luca I know the answer to this can have a lot of variables, but regarding your lived in duplex, do you find yourself breaking even or close to breaking even (i.e. does your rental income cover the mortage)? I often debate with myself the tradeoffs between owning a duplex or a potentially higher cash flowing 'house hack' like a three or four flat. Living for essentially free is awesome in its own right, but as mentioned, I tend to go back and forth a lot. What are your thoughts?  

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  • Paul De Luca
    Real Estate Agent · Chicago, IL · Member since 2018 · 1k+ posts · 1k+ votes
    5y

    @Steven Chraca

    It is very difficult to break even let alone cash flow while you are house hacking a duplex. You're mostly just mitigating your PITI payment, and having a partner split the payment with you makes it even better. Triplexes give you much better odds of cashflowing while house hacking, but the numbers make the most sense with a 4 flat obviously since you have greater economies of scale.

    If you were to use an FHA loan for example, the property needs to pass the Self Sufficiency Test. It is only required for 3-4 unit properties, but often times it's hard to pass with a triplex but easy to pass with a fourplex.

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  • Steven Chraca
    Schiller Park · Member since 2018 · 9 posts · 2 votes
    5y

    @Paul De Luca good to know! thanks!

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  • Crystal SmithPro Member
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    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    5y
    Originally posted by @Nicholas Papineau:

    My wife and I want to purchase and live in a duplex for 2-4 years. Half would be rented while we would occupy the other half. Does anyone have any negative experiences with living that closely to tenants?

    IMO- The negative with living close to tenants is when the tenants know you own the building. The solution if you plan on managing the building yourself is to establish a management company complete with its own bank account, PO Box & phone number (create a free google voice number). Have all payments and calls from the tenant go to the management company. If things really get bad with a tenant and they are nosy enough the may discover you're the owner by checking public records but that's something to worry about later....

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  • Mark AinleyBusiness Member
    Property Manager · Roselle, IL (Chicago Suburb) · Member since 2013 · 2k+ posts · 1k+ votes
    5y

    @Nicholas Papineau I always advise house hacking self managers to not tell the tenant you are the owner.  Just say you are the manager and you are handling the day to day on behalf of the owner.  This way you can always make this imaginary person somewhere else in the world the bad guy when you need to.

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