Taycheedah, WI · Member since 2017 · 21 posts · 14 votes
Hi all,
As the title illustrates I am looking for some pros and cons to living in a duplex I will purchase as an investment. I have options as to where I can live.
Some knowledge and/or experiences I am looking for are financing differences and pros /cons of living next door to tenant.
Personal experience very appreciated as well as theoretical input.
Specialist · Indianapolis, IN · Member since 2014 · 670 posts · 352 votes
8y
Pros
-Reduced down payment
-Reduced mortgage payment as your tenant is paying half so your cost of living is cheaper
-Up to date knowledge of your property and any problems that may arise
-Tenants know your next door and would most likely take better care of the place knowing this (theoretically of course)
-No need for property management as your next door
Cons
-Privacy
-Loss of potential cash flow (If the both sides were tenanted, you may pay your payment plus cash flow in your pocket vs. having to pay half the mortgage yourself)
-A difficult tenant will make living next door a nightmare
-If selling you can't do a 1031 exchange on a personal residence so unless you've lived in the property for two years there may be a tax burden if you've had an appreciation gain
Just a few off my head, I haven't been in this scenario.
Specialist · Indianapolis, IN · Member since 2014 · 670 posts · 352 votes
8y
Pros
-Reduced down payment
-Reduced mortgage payment as your tenant is paying half so your cost of living is cheaper
-Up to date knowledge of your property and any problems that may arise
-Tenants know your next door and would most likely take better care of the place knowing this (theoretically of course)
-No need for property management as your next door
Cons
-Privacy
-Loss of potential cash flow (If the both sides were tenanted, you may pay your payment plus cash flow in your pocket vs. having to pay half the mortgage yourself)
-A difficult tenant will make living next door a nightmare
-If selling you can't do a 1031 exchange on a personal residence so unless you've lived in the property for two years there may be a tax burden if you've had an appreciation gain
Just a few off my head, I haven't been in this scenario.
Taycheedah, WI · Member since 2017 · 21 posts · 14 votes
8y
Thanks for the input Jeff.
I hadn't considered the 1031 exchange as my plan is to hold. But the best laid plans..
It is definitely something to consider just in case. I think the biggest concern for me is the difficult tenant possibility. I work a lot of hours at my job and a difficult tenant would really be a hassle.
Royal Oak, MI · Member since 2015 · 257 posts · 230 votes
8y
3 years into my first duplex, I would say the most important thing is the same as any other lease. SFH, MFH, it doesn't matter. It always comes down to screening and expectations. I'm on my third tenant now and she's great. But it took a lot to get here. I had to evict people because they didn't quite grasp the fact that living in a duplex means you can't come home from the bar at 3 am and blast music. I had to evict my second tenant because she thought her boyfriend could move in without me adding him to the lease on our shared utilities duplex.
Now I don't settle for anything but GREAT tenants. It's not worth the trouble just to get the unit filled. I lay out all of my expectations in my lease that we go over in detail at lease signing so we are on the same page from day one. This has alleviated a lot of problems. I also maintain my property very well, and charge a premium rent amount per sf compared to my competition, so that weeds out a lot of people not up to my standards.
Real Estate Agent/Property Management · Houston, TX · Member since 2014 · 1k+ posts · 827 votes
8y
I think it's a great idea and recommend it to many of my clients. With a duplex to fourplex your tenants will be paying most, if not all, of your mortgage payment. It's the closest thing I can think of to practically living for free.
The one negative I've heard is that when you live on the property, the professional landlord/tenant relationship starts to break down. If the tenants feel like they have a personal relationship with you, there's the potential to try to get you to cut them some slack on late payments and other issues. It's a little hard to be a hard a$$ when your tenant is also your neighbor.
The answer to that is to hire a property manager and never reveal that you are actually the landlord. As far as the tenant is concerned, you're just another tenant. But I think that's overkill.
Taycheedah, WI · Member since 2017 · 21 posts · 14 votes
8y
@Shaun C. I totally agree with you. Screening is huge. I also agree that the better your product, the better you can expect your customers to be. Thanks for sharing your personal experiences.