Need Help with my first Big Decision

[Benjamin Andress]

I just graduated college and got a good job in the twin cities area. For those of you unfamiliar, that is the two biggest cities in Minnesota, Minneapolis and Saint Paul. I am renting now because I needed to find a place to move into immediately after graduating, and had no down payment.

I would like to start as soon as my lease ends. I plan to buy a duplex that I would like to live in for maybe 5 years. My girlfriend is going to grad school and we could see ourselves staying in this duplex for roughly 5 years. Correct me if I am wrong, but I am thinking that foreclosures are out of the realm of possibilities because of their timeline. I am looking to move in straight after my lease. Anyways, that is essentially the backstory now here is my biggest question.

Would I be ok to buy a duplex closer to the top end of my wanted budget (roughly $220,000) because I plan to live in there for awhile. OR is it only smart to buy a more affordable duplex that would be considered a 1-2% property. The duplex for $220,000 would have each side renting for roughly $1,000 per month before renovations while a house that I could buy for roughly $60,000 would have both sides renting for roughly $700 per month. Also, these $60,000 houses tend to require more risk of foundation issues, and would also require a more extensive renovation to increase rent.

I know this may be a long post, but I signed up for this website to get advice and information. ANY advice you may have for me would be greatly appreciated.

Bonus question ;) 

I tend to prefer side-by-side duplexes and sometimes have a hard time even looking at up/down duplexes. I just feel that if I were the one renting, I would much prefer to have side-by-side because of reasons such as hearing footsteps while living in the lower unit ect...  Am I right in having this preference? OR, if I am getting into this business, should I ignore my feelings about properties and just do what makes sense on paper?

Thanks so much, I look forward to hearing what people have to say!!!

[Conor Hesch]

Hello @Benjamin Andress did you know there is currently A LOT of free down payment grants in Minneapolis and St Paul ?   The money is first come first serve and will dry up eventually.  This is what I did for myself and what I do for other like the couple @Bruce Runn mentioned!

Use the loan that I used; 3% Down Payment and NO Mortgage Insurance (yes this loan really exists). This will make your monthly payment way lower than an FHA Loan. The only loan other than this that I know of that would allow less down-payment would be a Veteran Loan (Vets only). Once you add on all the available down payment assistance your actual cash out of pocket is WAY less than 3% down.　

2. Don't start with an FHA Loan, instead use it for your 2nd Duplex...because the 3% down loan that I used requires that you do not own any other homes at time of closing. So start with that one, then move to a 3.5% down FHA. Once you have an FHA loan you are not allowed to have another FHA loan unless relocating a great distance for work. FHA does not mind if you already have another home as long as it is not already FHA…make sense? That is why you start with the loan I used then move to FHA next. So if you follow that order you can maximize your options with the least amount of cash invested. 　

3. Now that you have exhausted your Low Down Payment Options (the one I used and FHA) you will need to use a Standard Conventional Loan and put 20% down to get your 3rd Duplex.　

4. The sky is the limit...you could continue to buy properties and build an empire or just stop there and enjoy more free time...I have friend who quit his job and just manages his properties now since he has 2,400 from each duplex in gross monthly rent.　

Be alert, if you time it right you might be able to get down payment assistance/grants there is over 10,000 in Minneapolis and St Paul right now (I got $5,000 from a local program and used it to buy my interest rate down to 3.125% which is way below typical market rates for a Duplex). There are also many down payment grants for first time home buyers in various cities around the US. My 250k Duplex total payment = 1,480 and the lower level pays me 1,200 while I live upstairs.

Keep in mind that this 4 step process I outlined takes time (anywhere from 1 to 10yrs depending on the person) so keep the big picture in mind but don't let it stress you out too much. Send me a message if you have any more questions or need specifics and keep us posted on your success! GOOD LUCK !