Duplex as first home investment?

Question

Hey y'all!

Would love to get advice about how you get a duplex to work for you in terms of cash flow. I'm looking to house hack a duplex and live in one unit while renting out the other but the cash flow wheneverI run the numbers tends to be towards the negative amounts. For a home of 330k I can put down around 40-45%. Am I missing anything? Anyone have a good calculator?

I'm a bit lost so would love to hear anyone's advice about what I might be missing or any tips/tricks they have!

Ryan Kelly · Answer

@Gaby Marin Your goal in owning a house hack is not to MAKE money, it is to LOWER your overall expenses versus owning on your own. You can then use those savings to invest or pay down the mortgage faster. For example, if you purchase a primary home and have a $2,000 overall PITI (mortgage + taxes + insurance), you owe 100% of $2,000. However, if you rent out one room for $700, you now only owe $1,300. You are still paying money each month, but your expenses are lower and you get some tax benefits as well. Same goes for a duplex. If you purchase a duplex and owe $2,200 a month, you can rent out the other unit for example at $1,400, and now your overall costs are just $800. It will be nearly impossible in all but the cheapest markets to find a duplex where you can rent out just one side and cash flow. Hope this helps.

Jordan Moorhead · Answer

@Gaby Marin don't put down more than you have to unless you plan to live there forever. I put down 3.5% on my place in East Austin and it makes sense.

Steven Foster Wilson · Answer

@Gaby Marin my first investment was a duplex while I was going to OSU. My wife and I lived in one room and rented out the other 7. Now its worth $150k more then what we bought it for, and rents for $4,500/month.

Needles to say, buying a multifamily can catapult you into success very quickly in RE.

Bob Norton · Answer

@Gaby Marin You could try AirBNB for your rental side, if zoning allows it.  I have clients doing this in New Orleans with their duplexes and the STR is paying almost all of their expenses.  Of course, that was before COVID when more people were traveling and I would expect it to return to that level after COVID has passed.

I suggest you look into this scenario and run the numbers to see if this strategy could work for you.

Kris Wong · Answer

It's very difficult to find a cash flowing duplex in Austin when you are renting out both sides. I am not sure how you got the idea that you could cash flow positive while only renting out one side, but that is quite far fetched. You need to compare total cash inflows and outflows when you are comparing different strategies. In this case, how much would you be spending per month if you were to rent, or purchase your own home? How much could you cash flow if you used all your capital on an investment property that you did not live in? Which scenario seems to work best for you, all things considered?

Ryan Kelly · Answer

@Allison Stewart I agree with you a duplex is a great investment and they can cash flow in Austin when BOTH sides are rented. We're cash flowing about $700/month on a duplex we just bought in south Austin. I think the debate in this thread is centered around trying to make it cash flow positively when only one side is rented (with the primary resident in the other). The short term play is buy the duplex, rent out one side and lower your overall expenses, then when you move out you can rent the other side and have it cash flow positive.

Allison Stewart · Answer

I’m not sure what people are talking about here but this is how we started and it works wonderfully! We’ve done 2 house hacked duplexes now. The first cash flows $900 a month - so I’m not sure why people are saying this isn’t a good option or that rented duplexes don’t cash flow here. We both both our duplexes on the MLS too. Both have appreciated significantly. We expect to cash flow about $600+ a month when we move out of our current duplex.

I’d strongly recommend this to any first time buyer! It’s true they don’t cash flow when you’re living in them but we live for free in our current place. Can’t beat that in Austin!

Zachary Ray · Answer

True the point is to have a cheaper mortgage and when you leave your side you continue to rent that out and then cashflow. Don't put a ton down, you can leverage your money for more assets later on. Over time the tenants will pay the mortgage off. If it doesn't cashflow after both sides are rented it might not be a great deal. 40 percent down is overkill in my opinion but you can do as you wish.

Vik J. · Answer

Bad idea. Full stop.

Nathan Fisher · Answer

I did this when i started. You lose money. IMO your first househack is about learning: Understanding tenants, building your contractor network, and learning how things work.

I would not put 40% down, that's wasted cash flow that you can use to buy a B property later.

Always happy to talk shop. feel free to reach out.

Duplex as first home investment?

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