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Updated over 7 years ago on . Most recent reply

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Mike Brown
  • Vancouver, WA
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Will I Basically Break Even on a Duplex If I Live in One Side?

Mike Brown
  • Vancouver, WA
Posted

Here goes.  This is my first forum question and I hope it's not a dumb one.  I also hope I posted this in the right area. 

So, I would like to buy a duplex as my first purchase. I live in Iowa where there are some duplexes that go for around $150k. I plan to put 20% down to avoid PMI and then actually pay it off in 2-3 years (I keep a very strict budget and live well below my means). I understand this is not the common approach. I know that everyone suggest using "other people's money" but I don't really want to carry a mortgage for 30 years.

My confusion and question is about the 50% rule how much profit would be made if I pay off the duplex in full. 

From what I understand, the 50% rule says that roughly 50% of all rental income will go towards expense ABOVE the mortgage.  So, if I don't' have a mortgage BUT I'm living in one side, will I basically be breaking even?  Per the 50% rule, if I rented BOTH sides, I would use the income from one side for expenses and I would be able to keep the income from the other.  But, if I am living in one side, and the other side goes for expenses, then I think I am breaking even.

I know we are speaking in generalities until I find a duplex that I can run actual numbers on but I am wondering if a duplex would really be that profitable once it is paid off?  I think I may be missing something because this doesn't really seem to net very much profit.  I am a complete newbie here so I am sure I have overlooked something.  I would greatly appreciate any thoughts anyone might have.  All books I read assume someone is carrying a mortgage but I haven't come across much regarding paid off properties.

Thanks,

Mike

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