Investing Strategy for First Duplex

[David W.]

Hello everyone. This is my first post as here, and I'm hoping you can all give me some great feedback. I have yet to invest in real estate, I am currently throwing my money out the window to rent, as well as paying off the various debts i have incurred since graduating from college 3 years ago.

Currently, I am putting money away to invest in a duplex, which I hope to be purchasing in a little over a year. My brother and I have been talking for quite a while now about pooling our resources to invest, as one of our previous bosses did with his family. They are all now worth a fortune through various franchises.

I know the risks of doing business with friends and family, so I don't need to know the pros and cons of that relationship.

Anyways, for the real questions/scenario I have.

The first scenario is to buy a duplex, and have my brother move in upstairs, so we could rent out what is generally the larger downstairs for more money, and use that tenant to make the mortgage payments. It will also keep one of us on the property to qualify for the home buyer incentives, and keep an eye on stuff that goes wrong. We are motivated to get the mortgage paid off ASAP to be able to fully use the property as leverage for more property later. However, I will still be living in an apartment and throwing money out the window under this arrangement. Living in the same unit is not an option, as I am currently living with my girlfriend.

The second scenario is to buy a duplex, and one of us takes half, and the other one gets the other half. Then we can both make a "rent" payment, and throw extra money at the mortgage, (compared to me throwing it away on rent) to pay it off. We can also use this to learn about the actual costs/duties of owning a home, and learning various DIY projects or learning how to do repairs ourselves without the pressure of a tenant needing to use the broken toilet, for example. However, the obvious downside to this is we are paying our own mortgage, versus a tenant paying it for us. The eventual plan in this scenario is to buy some more properties and move out, and rent out our starter property.

What I'm curious about, is the second scenario a good idea? Has anyone done this? And if so, what are some pros and cons to doing it that I haven't thought of? Or is my second scenario a terrible way to go? Duplexes in our area are similarly priced to single family homes, so the idea of splitting the "starter home" and using it as leverage later for more investments seems good to me right now. But I am sure there are points that I've missed. Or real world scenarios I don't know of. All input is greatly appreciated.