Duplex and triplexes owners questions on cashflow

12 Replies

Just looking for some duplex or triplex owners who could elaborate on the possibilities of cash flow in duplexes, just want to see if it is truly possible to have other occupants pay off the mortgage and get some cash flow.

Hi @David Smith it all depends on how you buy, how you structure your financing and your end goal. Folks that want more cash flow tend to get 30 amor loans. You will still get some principal paydown this way. But I have talked with other folks where they planned to live off their salary, and their goal was to have properties paid off as quick as possible, so they get a 15 year amor and make sure they have enough cash flow to cover vacancy, maintenance and capex. Then everything else goes towards principal paydown.

But the short answer is yes it is possible.

Not really sure what your question is here. Anything can cash flow if you buy right.

Let me go a little more into specific, I’ve been reading of tons of stories of people who own a duplex and live on one side and rent out the other. They end up having the other tenant(s) pay the mortgage and they live fore free. Or they get a ton of cashflow. I’m curious if I’m just seeing the lucky ones or if this is a real possibility that is likely if done correct?

Absolutely, that was exactly what I did.  For my very first home, I bought a duplex.  At that time, my mortgage was about $600/month and I rented out the other side for $850/month.  Fast forward 6 years...and some updates and killer appreciation in rents/home values for my area...now my payment is $680/month and the rent on the other side is $1100.

However, a big caveat is that it depends on where you are buying.  NOLA happens to be a decent "sweet spot" of fairly low cost homes (in some areas) coupled with decent rents.  That probably isn't going to be true for HCOL areas.

That initial success prompted me to start saving for down payments for my next properties. I now own two more duplexes and one SFH. I make, on average, $400/door monthly cash flow...after subtracting PITI and 18% of rents (for vacancy/repairs/capex).

What type of financing did you use to get started?

For my personal home, I used conventional financing with 20% down, though I could have gone as low as 5% down. Looking back, I wish I had. But I didn't know I was going to march gung-ho into REI, at that point, lol. For my non-owner occupied homes, I had to put either 20% or 25% down (depending on the lender).

If you're looking to buy an owner-occupied home with 4 units or less, it really isn't too much different than buying a SFH personal home, as far as the lending side goes. If the property is in good enough condition to get an FHA loan with 3% down, you can go that route. Or 5% down with a conventional loan. You'll also enjoy the lower interest rates that go along with owner-occupied, as opposed to non-owner-occupied.

Unfortunately I’d probably have to go with a non owner occupied loan, so probably 20% down... did you already have tenants when you bought? How long did it take you to get tenants if not.

Hi David. I'm no professional. I JUST purchased my first property. However, I can tell you that it is completely possible to have your mortgage paid in full, even if you're doing an owner-occupied situation. 

I purchased my duplex with an FHA (typically higher mortgage, due to less down payment, as you know) and my mortgage is still covered completely. I'll refi in a year and rent out the second unit.

@Krys L Burke Did you already have tenants or did you have to find tenants? I'm assuming you did this in New York?

There was tenants living here when we bought it. And yeah, it's in NY. It all depends on the price range that you're looking for and the rents in your area. This property we got for 75k, but rents are 650-800, depending. We're renting this for 700, and it covers our mortgage

Only my SFH already had a tenant in it, when I bought it. That was two years ago and I still have the same tenant. I bought the house for $38K (motivated seller) and the rent was $1125/mo. The closing happened to be on the 21st, so I got the next $1125 rent payment 10 days later. Pretty sweet!

None of the other properties I've purchased had tenants in them.  In fact, they were fixer-uppers.

In my area, on average, it takes me about 2-4 weeks to find a qualified tenant.  But, like anything else, that can vary substantially depending on area and even the time of year. 

Well I think I’m convinced that I want to buy a duplex and or triplex. Did all of you make your own contracts or talk to a lawyer before renting to tenants?

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