Should I buy my rental (duplex)?

[Rebecca Helm]

Hello all--new to the real estate thing. My landlord is selling my duplex, which I currently rent one unit in. It's walking distance to a major university, walking distance to downtown, Whole Foods, Trader Joe's etc. I've loved living here and they've done a ton of work to bring it up to snuff (including replacing most of the foundation). I've been looking for a single-family home in the $250,000 range ($1750 monthly payment including all utilities, savings for maintenance, etc), which is the max I can afford as one person.  My landlord wants to sell the duplex for $380,000 ($2669 monthly payment). I estimate that If I rent the other side for $1500/mo, I can get my monthly payments to roughly the equivalent of my current rent ($1169). But do I take the risk? As a first-time buyer, what am I missing/not considering that would change my mind one way or another? 

Thanks all! I'm so glad I found this place! 

[Joe Scaparra]

It would be helpful to know the location of your duplex.  It would help in understanding the risk.  The number 1 risk to any rental property is the inability to find a qualified tenant.  If your duplex is located in Texas then that risk is minimized and I feel good about your purchase.  

Buying your first property or first investment property will most likely be the hardest thing you will do. That being said, buying a duplex will have less financial risk than a single-family home (SFH). Consider comparing both as you have rudimentarily done so far. If you buy the SFH you have to come up with $1760 each month. If you get into a financial bind and cannot come up with the mortgage payments, your options are to try and sell the home or rent it out for its payments. With no income coming in on a SFH, pressure builds quickly. Selling in a down market might cause you to actually lose your home altogether. Instead, you buy the duplex, your monthly nut is now $2669 but your rent from one side is $1500. Your nut each month is not what your SFH ($1760) is but a mere $1169. Thus saving $591 each month or 7092 a year! Yeah, you might have some vacancy and additional maintenance that your single-family won't necessarily experience, but if you're in a strong demand location (like Texas) then it is not a problem. In Austin, (where I live) I strive for a one-day turnover because demand has been so strong. I've been landlording since 2003 and the longest I have gone vacant looking for a tenant has been one month. Throughout that time I have only raised rents not lower them. But let's say you get in that financial bind and can't pay even your $1169 to cover your mortgage. Or your job transfers you out of town and you need to go. Either case you simply move, rent out your unit and now you have $3000 rent coming in and $2669 going out......easy peasy!!! The key here is for the first two years, make the difference in payments to yourself $591 monthly X 12 X 2 = $15,084. That will give you your maintenance reserve. Once your above 10k in reserve you have the option of paying down your note quicker should you decide to do so. House Hacking with a duplex should whet your appetite to want to acquire more properties. Good luck! Cheers!