Has someone sold their primary home to buy a duplex? Any regrets?

Question

My only experience with real estate is purchasing my first home with FHA in 2020 with the amazing 2.25% and a lot of reading books and blogs to get an idea. My husband and I are self-employed, we provide executive transportation services in Miami. Decent income and good credit score, High DTI because business vehicles and no big savings (Working on that).

We want to grow our company; but we need to move to a better area in Miami and beat the traffic. We think this is our opportunity to start investing in REI and House Hacking a Duplex. My husband wants to sell the house to put the downpayment (less than 100k) if we qualify. I am not sure. I want the slow way and save money to buy the duplex, keep the primary as rental (will cashflow around $200/m) and do not lose the free money at 2,25% and future house appreciation. I know there is not enough information to make an informed decision, but I just want to read any similar experience here to overcome my analysis paralysis. I really appreciate it.

Alecia Loveless · Answer

@Mirbeni Gonzalez I owned a Bed and Breakfast, about 6500sq ft that I had owned for about 14 years. The last 4 years I owned it I only ran it on a very very limited basis and usually only for “friends and family” who were paying with cash and check. I provided a large self serve continental breakfast and suggested that if people wanted something hot that they go to the coffee shop in town or head to the next town over where there were 4 breakfast places. My price reflected this.

So, the building next door (duplex) came on the market and I watched the deals fall apart three times before I jumped in and eventually stole the deal which is a different story. My intention at this point was, and had been, to sell the bed and breakfast.

I was starting to dabble in real estate investing and so renovated the smaller side of the duplex, a 3/1 and moved my existing tenant in and slowly moved myself out of the B&B and into the larger side of the duplex, 3/3.

I’ve since sold the B&B but still house hack the duplex. The rent from the other side helps pay for the bills for the building. My wife is not always totally crazy about it because she had her own house for close to 25 years but since I’ve been house hacking B&Bs for 24 years it doesn’t bother me at all to occasionally hear a bang on the wall or a cough or the toilet flushing.

I think a key to remember about a duplex is to either make sure the numbers will work when you eventually move out of your side or that you have an exit strategy for then or that you are confident that it will have appreciated a bunch by then to give you other options.

Jason Wray · Answer

Mirbeni,

Sounds like you are moving into a direction of growth which is great. Few things to help offer some insight or options. If you own your own business and you have a "Business Checking account" you need to start paying all of your vehicles and credit cards out of the business account if you are not doing it already. If you can show either 12 months cancelled checks or 12 months bank statements showing vehicle's or credit cards paid from the business account the bank "Omits" or removes the debts from your personal DTI.

Have you calculates what would be the maximum amount you could take out of your home either cash out refinance or line of credit to use as a down payment versus selling the home. If you can get out enough cash and still cash flow it might make sense to keep the home. One important tip is make sure you take out the cash or line of credit before you move out so you can get the primary home LTV and rate.

Once you move out its non-owner occupied and the rate is higher and LTV for max cash out goes from 80% to 75% LTV. Buying a 2-4 unit is just a smart move in general because it allows you to buy a future rental with less money down. It also decreases your overall payment on the mortgage since you have another unit(s) helping with the monthly PITI payment.

You can also take out a Heloc or Heloan that will keep that first rate of 2.25% in place. Mortgage rates have come down since December so it helps afford the new cash out payment.

Mirbeni Gonzalez · Answer

Thanks for sharing your experience!

Mirbeni Gonzalez · Answer

Thank you!

Carlos Ptriawan · Answer

can you just househack your current one ? create new door/kitchen/bathroom if needed.

Mirbeni Gonzalez · Answer

Thank you Jason! Good to know about the vehicles payments, we are paying them form the business account. The last time I checked with a Heloc won't cashflow but I will run my numbers again to figure out my options. You provided so much value in your comment. Thank you so much for taking the time to reply.

Has someone sold their primary home to buy a duplex? Any regrets?

Has someone sold their primary home to buy a duplex? Any regrets?

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